Suit Cites E-mail as Proof of Huge Conspiracy to Rig Municipal Bond Rates
Bank of America e-mails are being cited as proof in a lawsuit by Los Angeles that claims the city’s brokers took kickbacks in a massive scheme to rig the bidding for municipal bonds.
The suit filed in Los Angeles superior court claims the rigged auctions increased profits for banks and deprived the city of millions of dollars in investment returns, the Daily Journal reports (sub. req.).
Some of the financial institutions named in the suit include Bear Sterns, JP Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, AIG and Smith Barney, according to the story.
The suit says the scheme is also the subject of a federal grand jury probe in New York, the Los Angeles Times reports. A separate lawsuit against municipal bond insurers filed by the city claims they failed to disclose their exposure to subprime securities, undermining ratings on city bonds.
Bank of America spokesperson Shirley Norton told the Daily Journal the city’s claims are similar to allegations in lawsuits filed by other cities, including Chicago and Baltimore. She could not comment on the Los Angeles suit because she had not seen it. The bank has been granted immunity from prosecution for cooperating in a probe of price-fixing in the municipal bond market and paid $14.7 million in a related tax settlement without admitting wrongdoing.
