Attorney General Announces Restitution Payments
From 2011 Settlement with Swiss Bank UBS AG
Attorney General George Jepsen said that checks representing restitution of approximately $541,000 will be issued today to 10 Connecticut entities as part of a 2011 multistate settlement with UBS AG over alleged anticompetitive and fraudulent conduct in the municipal bond derivatives industry.
The checks range from a low of $7,442 to South Central Connecticut Regional Water Authority to a high of $165,104 to the City of Stamford. They were among the state agencies, municipalities, school districts and not-for-profit entities nationwide that had entered into municipal derivative contracts with UBS AG, or used the bank as its broker for such transactions, between 2001 and 2004.
Restitution was an important component of the $90.8 million settlement between UBS AG, 24 states and the District of Columbia. Included in the amount UBS AG agreed to pay was a $2.5 million civil penalty and $5 million in fees and costs of the investigation to the settling states. Connecticut and New York led the investigation, which is ongoing.
“Connecticut government and not-for-profit entities are receiving rightful compensation for their losses arising from the wrongful conduct,” Attorney General Jepsen said. “A large amount of the funds entrusted to UBS AG was taxpayer money, which UBS steered into rigged or tainted municipal derivatives contracts.”
Also receiving restitution payments are: the Connecticut Housing Finance Authority, $127,007; the Hospital of Saint Raphael, $92,559; the State of Connecticut, $53,578; the City of Bridgeport, $26,677; the Connecticut Student Loan Foundation, $23,699; the University of the Sacred Heart in Fairfield, $18,485; the Connecticut Municipal Electric Energy Cooperative $17,630; and the City of Norwalk, $8,926.
In addition to the settlement with the Attorneys General, UBS AG also reached separate, but coordinated agreements with the U.S. Department of Justice’s Antitrust Division, the Internal Revenue Service and the U.S. Securities and Exchange Commission.
“UBS AG did the right thing by providing meaningful restitution to those harmed and by continuing to cooperate in the ongoing investigation of the bank’s co-conspirators,” said Jepsen, who serves as co-chair of the National Association of Attorneys General’s Standing Committee on Antitrust.
Municipal bond derivatives are contracts that tax-exempt issuers use to reinvest proceeds of bond sales until the funds are needed, or to hedge interest-rate risk.
In April 2008, the states began investigating allegations that certain large financial institutions, including national banks and insurance companies, and certain brokers and swap advisors, engaged in various schemes to rig bids and commit other deceptive, unfair and fraudulent conduct in the municipal bond derivatives market.
The wrongful conduct took the form of bid-rigging, submission of non-competitive courtesy bids and submission of fraudulent certifications of compliance to government agencies, among others, in contravention of U.S. Treasury regulations.
To date, the Attorneys General multistate working group has entered into settlements with five financial institutions worth nearly $350 million for the participating states. In addition to UBS AG, the Attorneys General reached settlements with GE Funding Capital Market Services, Inc., Bank of America, JP Morgan and Wachovia. Connecticut has received $2.9 million for its legal work and share of the civil penalties collected as part of the overall investigation. Those funds were deposited in the state’s General Fund.
Assistant Attorney General Christopher Haddad and Paralegal Lori Measer, under the direction of Assistant Attorney General Michael E. Cole, chief of the Antitrust and Government Program Fraud Department, worked with the Attorney General in this case.