|May 4, 2011
Contact: Whitney Ray
Phone: (850) 245-0150
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TALLAHASSEE, Fla. –Today, Attorney General Pam Bondi announced that Florida reached a $90.8-million, multistate settlement with Union Bank of Switzerland AG (UBS) for its alleged role in a nationwide scheme to rig bids and engage in other anticompetitive and fraudulent conduct relating to municipal bond derivatives that defrauded state agencies, local governmental entities and not-for-profit entities. The multistate settlement is part of a settlement UBS is entering into simultaneously with the United States Department of Justice’s Antitrust Division (DOJ), the Securities and Exchange Commission (SEC), and the Internal Revenue Service (IRS).
“Bid rigging and other fraudulent conduct is illegal, and we will hold banks and brokers responsible for their actions,” said Attorney General Bondi. “I am pleased that we were able to reach a resolution that will repay those entities harmed by the fraudulent activity.”
Pursuant to the settlement agreement, UBS has agreed to pay $63.3 million in restitution nationwide to state agencies, local governmental entities, and not-for-profit organizations that entered into municipal derivative contracts with UBS, or used UBS as its broker for such transactions, between 2001 and 2004. In addition, UBS agreed to pay a $2.5-million civil penalty and $5 million in fees and costs of the investigation to the settling states. The state settlement also directs UBS to pay $20 million in restitution directly to certain other government and not-for-profit entities as part of a separate settlement it entered into today with the SEC.
Today’s global settlements are the result of an ongoing criminal and civil investigation involving 25 state Attorneys General and federal authorities. The investigation focuses on individuals at UBS, other major financial institutions, and certain brokers in connection with the marketing and sale of municipal derivative investments, which are typically investment contracts that government issuers and not-for-profit entities use to reinvest the proceeds of tax-exempt bond offerings until the funds are needed or to hedge against interest rate risk. The transactions are often awarded after a competitive bidding process or negotiated directly between the financial institution and the issuer.
Under the agreement, UBS must provide the Attorneys General with written standards of conduct with respect to antitrust and unfair trade practices and provide a copy to employees. UBS has represented that it has terminated its illegal conduct, and they must also cooperate with the ongoing investigation of the Attorneys General into fraudulent conduct regarding municipal bond derivatives.
Other states joining Florida in the UBS settlement include: Alabama, California, Colorado, Connecticut, District of Columbia, Idaho, Illinois, Kansas, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Texas, Tennessee and Wisconsin.