"Consumer Watchdog: After appointing Richard Cordray to lead the Consumer Financial Protection Bureau earlier this week, the President traveled to Shaker Heights, Ohio to talk about his decision -- and the fight to help secure a better future for the middle class. The CFPB is in place to ensure the integrity of the financial system and protect all American consumers from fraud and unfair play. The President said: “See, most people in the financial services industry do the right thing, but they're at a disadvantage if nobody is enforcing the rules. We can't let that happen. Now is not the time to play politics while people’s livelihoods are at stake. Now is the time to do everything we can to protect consumers, prevent financial crises like the one that we’ve been through from ever happening again. That starts with letting Richard do his job.”
This is a photo of the National Register of Historic Places listing with reference number 7000063
Saturday, January 7, 2012
PRESIDENT DEFENDS APPOINTMENT OF LEADER FOR THE CONSUMER FINANCIAL PROTECTION BUREAU
The following excerpt is from the White House website:
"Consumer Watchdog: After appointing Richard Cordray to lead the Consumer Financial Protection Bureau earlier this week, the President traveled to Shaker Heights, Ohio to talk about his decision -- and the fight to help secure a better future for the middle class. The CFPB is in place to ensure the integrity of the financial system and protect all American consumers from fraud and unfair play. The President said: “See, most people in the financial services industry do the right thing, but they're at a disadvantage if nobody is enforcing the rules. We can't let that happen. Now is not the time to play politics while people’s livelihoods are at stake. Now is the time to do everything we can to protect consumers, prevent financial crises like the one that we’ve been through from ever happening again. That starts with letting Richard do his job.”
"Consumer Watchdog: After appointing Richard Cordray to lead the Consumer Financial Protection Bureau earlier this week, the President traveled to Shaker Heights, Ohio to talk about his decision -- and the fight to help secure a better future for the middle class. The CFPB is in place to ensure the integrity of the financial system and protect all American consumers from fraud and unfair play. The President said: “See, most people in the financial services industry do the right thing, but they're at a disadvantage if nobody is enforcing the rules. We can't let that happen. Now is not the time to play politics while people’s livelihoods are at stake. Now is the time to do everything we can to protect consumers, prevent financial crises like the one that we’ve been through from ever happening again. That starts with letting Richard do his job.”
Friday, January 6, 2012
SEC FILES INJUNCTION AGAINST BOND SELL AND HIS COMPANY
"The Securities and Exchange Commission today announced its filing of a civil injunctive action alleging fraud in the offer and sale of municipal bonds by Charles A. Aiken and his entity, Aiken Continental, L.L.C.
Filed December 29, 2011 in the U.S. District Court for the Southern District of West Virginia, the SEC’s complaint alleges that Aiken and Aiken Continental made material misrepresentations and omissions in connection with the 2006 offer and sale of $2.96 million of industrial development revenue bonds. Raleigh County, West Virginia issued the bonds in October 2006 to facilitate Aiken Continental’s acquisition of Continental Casket, Inc., a casket manufacturing facility located within its jurisdiction. Aiken formed Aiken Continental in August 2006 for the sole purpose of acquiring Continental Casket’s assets, and served as its sole principal.
According to the SEC’s complaint, Aiken concealed from key participants to the transaction, including the issuer, bond counsel, the underwriter, and the bondholders’ trustee, that he had been indicted for felony financial fraud in late 2005. Aiken also concealed the fact that he was in the process of negotiating a plea agreement just before the bonds were issued in October 2006, which included a term of imprisonment. In addition, Aiken failed to disclose material information about a $200,000 loan to Aiken and Aiken Continental from an entity partially owned by their attorney, in order to facilitate the closing of the transaction. This loan required a $100,000 interest payment, and gave the lender a twenty percent equity interest in Aiken Continental if the loan plus interest was not fully repaid within six months. Aiken’s failure to disclose details about his criminal proceeding and the loan rendered certain statements in the bonds’ Official Statement materially misleading. For example, one section of the Official Statement contained information about Aiken’s background, but failed to mention his felony indictment for financial fraud. Another section of the Official Statement contained projected financial statements for Aiken Continental, but failed to take into account the repayment of the $200,000 loan plus $100,000 interest. Aiken Continental supplied and authorized the use of information in the Official Statement. Aiken signed the Official Statement on behalf of Aiken Continental, and authorized it to be distributed to investors.
According to the SEC’s complaint, Aiken served 90 days in federal prison and 90 days of home detention in Georgia following the close of the transaction. Aiken’s six-month absence negatively affected the operations of the casket company and the Raleigh County bonds are now in default, with the entire principal amount and accrued interest due.
Based on this conduct, the SEC’s complaint alleges that Aiken and Aiken Continental violated Section 17(a)(2) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder. The SEC’s complaint seeks permanent injunctions, disgorgement, prejudgment interest, and civil money penalties."
Thursday, January 5, 2012
BEVERLY HILLS FINANCIAL FIRM AND FOUNDER PLEAD GUILTY TO BID-RIGGING IN MUNI BOND MARKET
The following excerpt is from the Department of Justice website:
"WASHINGTON – A Beverly Hills, Calif.,-based financial products and services firm, and its founder and owner pleaded guilty today in the Southern District of New York for their participation in bid-rigging and fraud conspiracies related to contracts for the investment of municipal bond proceeds and other related municipal finance contracts, the Department of Justice announced.
Rubin/Chambers, Dunhill Insurance Services, also known as CDR Financial Products, and David Rubin, CDR founder and owner, pleaded guilty before U.S. District Judge Victor Marrero in the Southern District of New York. Rubin and CDR, along with Zevi Wolmark, also known as Stewart Wolmark, the former chief financial officer and managing director of CDR, and Evan Andrew Zarefsky, a vice president of CDR, were indicted on Oct. 29, 2009. The trial for Wolmark and Zarefsky is scheduled to begin on Jan. 3, 2012, in the Southern District of New York.
Rubin and CDR each pleaded guilty to participating in separate bid-rigging and fraud conspiracies with various financial institutions and insurance companies and their representatives. These institutions and companies, or “providers,” offered a type of contract, known as an investment agreement, to state, county and local governments and agencies throughout the United States. The public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects. Rubin and CDR also pleaded guilty to one count of wire fraud in connection with those schemes.
“Mr. Rubin and his company engaged in fraudulent and anticompetitive conduct that harmed municipalities and other public entities,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Justice Department’s Antitrust Division. “Today’s guilty pleas are an important development in our continued efforts to hold accountable those who violate the antitrust laws and subvert the competitive process in our financial markets.”
According to court documents, CDR was hired by public entities that issue municipal bonds to act as their broker and conduct what was supposed to be a competitive bidding process for contracts for the investment of municipal bond proceeds. Competitive bidding for those contracts is the subject of regulations issued by the U.S. Department of the Treasury and is related to the tax-exempt status of the bonds.
During his plea hearing, Rubin admitted that, from 1998 until 2006, he and other co-conspirators supplied information to providers to help them win bids, solicited intentionally losing bids, and signed certifications that contained false statements regarding whether the bidding process for certain investment agreements complied with relevant Treasury Regulations. Additionally, Rubin admitted that he and other co-conspirators solicited fees from providers, which were in fact payments to CDR for rigging or manipulating bids for certain investment agreements so that a particular provider would win that agreement at an artificially determined price.
“Mr. Rubin and his firm were trusted with public money and confidence to assist municipalities with issuing bonds,” said FBI Assistant Director in Charge Janice K. Fedarcyk. “Contrary to his agreement and the law, Mr. Rubin shirked his responsibilities while defrauding taxpayers. Thankfully, this bid-rigging scheme, where Mr. Rubin decided the winners and losers, is over.”
“ IRS is the federal agency responsible for compliance with tax laws applicable to the issuance of tax-exempt municipal bonds,” said Special Agent in Charge Charles R. Pine of the Internal Revenue Service-Criminal Investigation (IRS-CI) New York Field Office . “Today’s guilty pleas by David Rubin and CDR are the result of a coordinated effort by the Department of Justice and IRS-Criminal Investigation. Depriving municipalities of investment earnings and diverting arbitrage via illegal agreements and kickbacks will not be tolerated. IRS-Criminal Investigation agents will continue to investigate fraud in the municipal bond market and recommend prosecution against those who have participated in the fraudulent scheme.”
The bid–rigging conspiracy with which Rubin is charged carries a maximum penalty of 10 years in prison and a $1 million criminal fine. The fraud conspiracy with which Rubin is charged carries a maximum penalty of five years in prison and a $250,000 criminal fine. The wire fraud charge with which Rubin is charged carries a maximum penalty of 20 years in prison and a $250,000 criminal fine. The maximum fines for each of these offenses may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
CDR faces a maximum criminal fine on the bid-rigging charge of $100 million. The fraud conspiracy and wire fraud offenses with which CDR is charged each carry a maximum criminal fine of $500,000. The maximum fines for each of these offenses may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
Rubin is the tenth individual to plead guilty in an ongoing federal investigation into the municipal bonds industry, which is being conducted by the Antitrust Division’s New York Field Office, the FBI and IRS-CI.
In addition, Dominick Carollo and Peter S. Grimm, formerly of GE Funding Capital Market Services, and Steven E. Goldberg, formerly of GE Funding Capital Market Services and FSA, were indicted on July 27, 2010, and are scheduled to begin trial in April 2012. Three former UBS employees, Peter Ghavami, Gary Heinz and Michael Welty, were indicted on Dec. 9, 2010."
Wednesday, January 4, 2012
INVESTMENT ADVISOR ALLEGEDLY USED SOCIAL MEDIA WEBSITES TO SELL FAKE SECURITEIS
The following excerpt is from the SEC website:
“Washington, D.C., Jan. 4, 2012 — The Securities and Exchange Commission today charged an Illinois-based investment adviser with offering to sell fictitious securities on LinkedIn and issued two alerts in an agency-wide effort to highlight the risks investors and advisory firms face when using social media.
The SEC’s Division of Enforcement alleges that Anthony Fields of Lyons, Ill. offered more than $500 billion in fictitious securities through various social media websites. For example, he used LinkedIn discussions to promote fictitious “bank guarantees” and “medium-term notes.” The postings resulted in interest from multiple purported potential buyers.
“Fraudsters are quick to adapt to new technologies to exploit them for unlawful purposes,” said Robert B. Kaplan, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “Social media is no exception, and today’s enforcement action reflects our determination to pursue fraudulent activity on new and evolving platforms.”
According to the SEC’s order instituting administrative proceedings against Fields, he made multiple fraudulent offers through his two sole proprietorships – Anthony Fields & Associates (AFA) and Platinum Securities Brokers. Fields provided false and misleading information concerning AFA’s assets under management, clients, and operational history to the public through its website and in SEC filings. Fields also failed to maintain required books and records, did not implement adequate compliance policies and procedures, and held himself out to be a broker-dealer while he was not registered with the SEC.
One of the alerts issued today – a National Examination Risk Alert titled“Investment Adviser Use of Social Media” – provides staff observations based on a review of investment advisers of varying sizes and strategies that use social media. In growing numbers, registered investment adviser firms are using social media to communicate with existing and potential clients, promote services, educate investors, and recruit new employees.
“As investment advisers increasingly utilize social media to communicate with clients and potential clients, firms need to be mindful of the applicable standards governing those communications,” said Carlo di Florio, Director of the Office of Compliance Inspections and Examinations (OCIE).
The alert reviews concerns that may arise from use of social media by firms and their associated persons, and offers suggestions for complying with the antifraud, compliance, and recordkeeping provisions of the federal securities laws. The alert notes that firms should consider how to implement new compliance programs or revisit their existing programs in the face of rapidly changing technology.
The SEC also issued an Investor Alert titled “Social Media and Investing: Avoiding Fraud” prepared by the Office of Investor Education and Advocacy. The alert aims to help investors be better aware of fraudulent investment schemes that use social media, and provides tips for checking the backgrounds of advisers and brokers. A new Investor Bulletin titled “Social Media and Investing: Understanding Your Accounts” contains best practices including privacy settings, security tips, and password selection aimed to help social media users protect their personal information and avoid fraud.
“More and more, investors are using social media to help them with investment decisions. While social media can provide many benefits for investors, it also makes an attractive target for fraudsters. The Investor Alert provides some useful tips to help investors look out for securities fraud online,” said Lori J. Schock, Director of the Office of Investor Education and Advocacy.”
“Washington, D.C., Jan. 4, 2012 — The Securities and Exchange Commission today charged an Illinois-based investment adviser with offering to sell fictitious securities on LinkedIn and issued two alerts in an agency-wide effort to highlight the risks investors and advisory firms face when using social media.
The SEC’s Division of Enforcement alleges that Anthony Fields of Lyons, Ill. offered more than $500 billion in fictitious securities through various social media websites. For example, he used LinkedIn discussions to promote fictitious “bank guarantees” and “medium-term notes.” The postings resulted in interest from multiple purported potential buyers.
“Fraudsters are quick to adapt to new technologies to exploit them for unlawful purposes,” said Robert B. Kaplan, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “Social media is no exception, and today’s enforcement action reflects our determination to pursue fraudulent activity on new and evolving platforms.”
According to the SEC’s order instituting administrative proceedings against Fields, he made multiple fraudulent offers through his two sole proprietorships – Anthony Fields & Associates (AFA) and Platinum Securities Brokers. Fields provided false and misleading information concerning AFA’s assets under management, clients, and operational history to the public through its website and in SEC filings. Fields also failed to maintain required books and records, did not implement adequate compliance policies and procedures, and held himself out to be a broker-dealer while he was not registered with the SEC.
One of the alerts issued today – a National Examination Risk Alert titled“Investment Adviser Use of Social Media” – provides staff observations based on a review of investment advisers of varying sizes and strategies that use social media. In growing numbers, registered investment adviser firms are using social media to communicate with existing and potential clients, promote services, educate investors, and recruit new employees.
“As investment advisers increasingly utilize social media to communicate with clients and potential clients, firms need to be mindful of the applicable standards governing those communications,” said Carlo di Florio, Director of the Office of Compliance Inspections and Examinations (OCIE).
The alert reviews concerns that may arise from use of social media by firms and their associated persons, and offers suggestions for complying with the antifraud, compliance, and recordkeeping provisions of the federal securities laws. The alert notes that firms should consider how to implement new compliance programs or revisit their existing programs in the face of rapidly changing technology.
The SEC also issued an Investor Alert titled “Social Media and Investing: Avoiding Fraud” prepared by the Office of Investor Education and Advocacy. The alert aims to help investors be better aware of fraudulent investment schemes that use social media, and provides tips for checking the backgrounds of advisers and brokers. A new Investor Bulletin titled “Social Media and Investing: Understanding Your Accounts” contains best practices including privacy settings, security tips, and password selection aimed to help social media users protect their personal information and avoid fraud.
“More and more, investors are using social media to help them with investment decisions. While social media can provide many benefits for investors, it also makes an attractive target for fraudsters. The Investor Alert provides some useful tips to help investors look out for securities fraud online,” said Lori J. Schock, Director of the Office of Investor Education and Advocacy.”
INVESTMENT FIRM HEAD GETS 20 YEAR PRISON TERM FOR MAIL FRAUD AND MONEY LAUNDERING
The following excerpt is from the SEC website:
“The U.S. Securities and Exchange Commission announced today that on December 13, 2011, the Honorable William Stiehl, United States District Court judge, sentenced Edward Lynn Moskop, 64, of Belleville, Illinois, to the maximum statutory penalties of 240 months’ imprisonment on Mail Fraud and 120 months on Money Laundering, to be served concurrently. Judge Stiehl also ordered Moskop to pay more than $1.49 million in restitution to his victims. The sentencing followed Moskop’s August 3, 2011 plea of guilty to the two count indictment.
Moskop's 20-year prison sentence was the culmination of his long-time investment fraud and misappropriation scheme. In the criminal case, the United States Attorney’s office for the Southern District of Illinois alleged that Moskop, operating as Financial Services Moskop and Associates, Inc., acted as a securities broker for several customers by making investments on their behalf. According to the U.S. Attorney’s office, from 1991 to 2010, Moskop persuaded customers to provide him with funds for investment. But, according to the U.S. Attorney’s office, instead of making the investment, Moskop kept the funds for his own use. The U.S. Attorney’s office alleged that Moskop also provided his customers with fraudulent periodic investment statements showing false interest and gains in the investments. According to the U.S. Attorney’s office, Moskop obtained by fraud approximately $2,400,000 from 25 victims. The U.S. Attorney’s office alleged that Moskop’s victims included his relatives, individuals referred by trusted friends and attorneys, a local Veterans of Foreign War Post, and long-time customers of his insurance business.
The criminal charges against Moskop are related to the conduct underlying the SEC’s civil action against Moskop and his company, Financial Services Moskop & Associates. On November 19, 2010, the SEC filed an emergency civil action in the United States District Court for the Northern District of Illinois to halt an ongoing fraud on investors conducted by Moskop and his company. In its complaint, the SEC alleged that from 1989 until the filing of the SEC’s action against Moskop and his company, Moskop misappropriated most of the life savings of at least two elderly investors. On the same day the SEC filed its case, the Honorable Rebecca R. Pallmeyer, United States District Court Judge, granted the SEC’s motion for emergency relief, entering a temporary restraining order against Moskop and his company and an order freezing their assets. On November 27, 2010, the court entered a preliminary injunction against Moskop and his company, and on July 21, 2011, the court entered a permanent injunction against Moskop and his company and continued the order freezing their assets. The SEC's action, which is ongoing, seeks disgorgement of the ill-gotten gains received by Moskop and his company, as well as civil penalties.”
“The U.S. Securities and Exchange Commission announced today that on December 13, 2011, the Honorable William Stiehl, United States District Court judge, sentenced Edward Lynn Moskop, 64, of Belleville, Illinois, to the maximum statutory penalties of 240 months’ imprisonment on Mail Fraud and 120 months on Money Laundering, to be served concurrently. Judge Stiehl also ordered Moskop to pay more than $1.49 million in restitution to his victims. The sentencing followed Moskop’s August 3, 2011 plea of guilty to the two count indictment.
Moskop's 20-year prison sentence was the culmination of his long-time investment fraud and misappropriation scheme. In the criminal case, the United States Attorney’s office for the Southern District of Illinois alleged that Moskop, operating as Financial Services Moskop and Associates, Inc., acted as a securities broker for several customers by making investments on their behalf. According to the U.S. Attorney’s office, from 1991 to 2010, Moskop persuaded customers to provide him with funds for investment. But, according to the U.S. Attorney’s office, instead of making the investment, Moskop kept the funds for his own use. The U.S. Attorney’s office alleged that Moskop also provided his customers with fraudulent periodic investment statements showing false interest and gains in the investments. According to the U.S. Attorney’s office, Moskop obtained by fraud approximately $2,400,000 from 25 victims. The U.S. Attorney’s office alleged that Moskop’s victims included his relatives, individuals referred by trusted friends and attorneys, a local Veterans of Foreign War Post, and long-time customers of his insurance business.
The criminal charges against Moskop are related to the conduct underlying the SEC’s civil action against Moskop and his company, Financial Services Moskop & Associates. On November 19, 2010, the SEC filed an emergency civil action in the United States District Court for the Northern District of Illinois to halt an ongoing fraud on investors conducted by Moskop and his company. In its complaint, the SEC alleged that from 1989 until the filing of the SEC’s action against Moskop and his company, Moskop misappropriated most of the life savings of at least two elderly investors. On the same day the SEC filed its case, the Honorable Rebecca R. Pallmeyer, United States District Court Judge, granted the SEC’s motion for emergency relief, entering a temporary restraining order against Moskop and his company and an order freezing their assets. On November 27, 2010, the court entered a preliminary injunction against Moskop and his company, and on July 21, 2011, the court entered a permanent injunction against Moskop and his company and continued the order freezing their assets. The SEC's action, which is ongoing, seeks disgorgement of the ill-gotten gains received by Moskop and his company, as well as civil penalties.”
FOUNDER OF BEVERLY HILLS FINANCIAL FIRM PLEADS GUILTY TO BID-RIGGING AND FRAUD IN MUNICIPAL BOND MARKET
The following excerpt is from the Department of Justice website:
“WASHINGTON — A Beverly Hills, Calif.,-based financial products and services firm, and its founder and owner pleaded guilty today in the Southern District of New York for their participation in bid-rigging and fraud conspiracies related to contracts for the investment of municipal bond proceeds and other related municipal finance contracts, the Department of Justice announced.
Rubin/Chambers, Dunhill Insurance Services, also known as CDR Financial Products, and David Rubin, CDR founder and owner, pleaded guilty before U.S. District Judge Victor Marrero in the Southern District of New York. Rubin and CDR, along with Zevi Wolmark, also known as Stewart Wolmark, the former chief financial officer and managing director of CDR, and Evan Andrew Zarefsky, a vice president of CDR, were indicted on Oct. 29, 2009. The trial for Wolmark and Zarefsky is scheduled to begin on Jan. 3, 2012, in the Southern District of New York.
Rubin and CDR each pleaded guilty to participating in separate bid-rigging and fraud conspiracies with various financial institutions and insurance companies and their representatives. These institutions and companies, or “providers,” offered a type of contract, known as an investment agreement, to state, county and local governments and agencies throughout the United States. The public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects. Rubin and CDR also pleaded guilty to one count of wire fraud in connection with those schemes.
“Mr. Rubin and his company engaged in fraudulent and anticompetitive conduct that harmed municipalities and other public entities,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Justice Department’s Antitrust Division. “Today’s guilty pleas are an important development in our continued efforts to hold accountable those who violate the antitrust laws and subvert the competitive process in our financial markets.”
According to court documents, CDR was hired by public entities that issue municipal bonds to act as their broker and conduct what was supposed to be a competitive bidding process for contracts for the investment of municipal bond proceeds. Competitive bidding for those contracts is the subject of regulations issued by the U.S. Department of the Treasury and is related to the tax-exempt status of the bonds.
During his plea hearing, Rubin admitted that, from 1998 until 2006, he and other co-conspirators supplied information to providers to help them win bids, solicited intentionally losing bids, and signed certifications that contained false statements regarding whether the bidding process for certain investment agreements complied with relevant Treasury Regulations. Additionally, Rubin admitted that he and other co-conspirators solicited fees from providers, which were in fact payments to CDR for rigging or manipulating bids for certain investment agreements so that a particular provider would win that agreement at an artificially determined price.
“Mr. Rubin and his firm were trusted with public money and confidence to assist municipalities with issuing bonds,” said FBI Assistant Director in Charge Janice K. Fedarcyk. “Contrary to his agreement and the law, Mr. Rubin shirked his responsibilities while defrauding taxpayers. Thankfully, this bid-rigging scheme, where Mr. Rubin decided the winners and losers, is over.”
“IRS is the federal agency responsible for compliance with tax laws applicable to the issuance of tax-exempt municipal bonds,” said Special Agent in Charge Charles R. Pine of the Internal Revenue Service-Criminal Investigation (IRS-CI) New York Field Office. “Today’s guilty pleas by David Rubin and CDR are the result of a coordinated effort by the Department of Justice and IRS-Criminal Investigation. Depriving municipalities of investment earnings and diverting arbitrage via illegal agreements and kickbacks will not be tolerated. IRS-Criminal Investigation agents will continue to investigate fraud in the municipal bond market and recommend prosecution against those who have participated in the fraudulent scheme.”
The bid–rigging conspiracy with which Rubin is charged carries a maximum penalty of 10 years in prison and a $1 million criminal fine.The fraud conspiracy with which Rubin is charged carries a maximum penalty of five years in prison and a $250,000 criminal fine.The wire fraud charge with which Rubin is charged carries a maximum penalty of 20 years in prison and a $250,000 criminal fine. The maximum fines for each of these offenses may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
CDR faces a maximum criminal fine on the bid-rigging charge of $100 million. The fraud conspiracy and wire fraud offenses with which CDR is charged each carry a maximum criminal fine of $500,000. The maximum fines for each of these offenses may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
Rubin is the tenth individual to plead guilty in an ongoing federal investigation into the municipal bonds industry, which is being conducted by the Antitrust Division’s New York Field Office, the FBI and IRS-CI.
In addition, Dominick Carollo and Peter S. Grimm, formerly of GE Funding Capital Market Services, and Steven E. Goldberg, formerly of GE Funding Capital Market Services and FSA, were indicted on July 27, 2010, and are scheduled to begin trial in April 2012. Three former UBS employees, Peter Ghavami, Gary Heinz and Michael Welty, were indicted on Dec. 9, 2010.”
“WASHINGTON — A Beverly Hills, Calif.,-based financial products and services firm, and its founder and owner pleaded guilty today in the Southern District of New York for their participation in bid-rigging and fraud conspiracies related to contracts for the investment of municipal bond proceeds and other related municipal finance contracts, the Department of Justice announced.
Rubin/Chambers, Dunhill Insurance Services, also known as CDR Financial Products, and David Rubin, CDR founder and owner, pleaded guilty before U.S. District Judge Victor Marrero in the Southern District of New York. Rubin and CDR, along with Zevi Wolmark, also known as Stewart Wolmark, the former chief financial officer and managing director of CDR, and Evan Andrew Zarefsky, a vice president of CDR, were indicted on Oct. 29, 2009. The trial for Wolmark and Zarefsky is scheduled to begin on Jan. 3, 2012, in the Southern District of New York.
Rubin and CDR each pleaded guilty to participating in separate bid-rigging and fraud conspiracies with various financial institutions and insurance companies and their representatives. These institutions and companies, or “providers,” offered a type of contract, known as an investment agreement, to state, county and local governments and agencies throughout the United States. The public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects. Rubin and CDR also pleaded guilty to one count of wire fraud in connection with those schemes.
“Mr. Rubin and his company engaged in fraudulent and anticompetitive conduct that harmed municipalities and other public entities,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Justice Department’s Antitrust Division. “Today’s guilty pleas are an important development in our continued efforts to hold accountable those who violate the antitrust laws and subvert the competitive process in our financial markets.”
According to court documents, CDR was hired by public entities that issue municipal bonds to act as their broker and conduct what was supposed to be a competitive bidding process for contracts for the investment of municipal bond proceeds. Competitive bidding for those contracts is the subject of regulations issued by the U.S. Department of the Treasury and is related to the tax-exempt status of the bonds.
During his plea hearing, Rubin admitted that, from 1998 until 2006, he and other co-conspirators supplied information to providers to help them win bids, solicited intentionally losing bids, and signed certifications that contained false statements regarding whether the bidding process for certain investment agreements complied with relevant Treasury Regulations. Additionally, Rubin admitted that he and other co-conspirators solicited fees from providers, which were in fact payments to CDR for rigging or manipulating bids for certain investment agreements so that a particular provider would win that agreement at an artificially determined price.
“Mr. Rubin and his firm were trusted with public money and confidence to assist municipalities with issuing bonds,” said FBI Assistant Director in Charge Janice K. Fedarcyk. “Contrary to his agreement and the law, Mr. Rubin shirked his responsibilities while defrauding taxpayers. Thankfully, this bid-rigging scheme, where Mr. Rubin decided the winners and losers, is over.”
“IRS is the federal agency responsible for compliance with tax laws applicable to the issuance of tax-exempt municipal bonds,” said Special Agent in Charge Charles R. Pine of the Internal Revenue Service-Criminal Investigation (IRS-CI) New York Field Office. “Today’s guilty pleas by David Rubin and CDR are the result of a coordinated effort by the Department of Justice and IRS-Criminal Investigation. Depriving municipalities of investment earnings and diverting arbitrage via illegal agreements and kickbacks will not be tolerated. IRS-Criminal Investigation agents will continue to investigate fraud in the municipal bond market and recommend prosecution against those who have participated in the fraudulent scheme.”
The bid–rigging conspiracy with which Rubin is charged carries a maximum penalty of 10 years in prison and a $1 million criminal fine.The fraud conspiracy with which Rubin is charged carries a maximum penalty of five years in prison and a $250,000 criminal fine.The wire fraud charge with which Rubin is charged carries a maximum penalty of 20 years in prison and a $250,000 criminal fine. The maximum fines for each of these offenses may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
CDR faces a maximum criminal fine on the bid-rigging charge of $100 million. The fraud conspiracy and wire fraud offenses with which CDR is charged each carry a maximum criminal fine of $500,000. The maximum fines for each of these offenses may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
Rubin is the tenth individual to plead guilty in an ongoing federal investigation into the municipal bonds industry, which is being conducted by the Antitrust Division’s New York Field Office, the FBI and IRS-CI.
In addition, Dominick Carollo and Peter S. Grimm, formerly of GE Funding Capital Market Services, and Steven E. Goldberg, formerly of GE Funding Capital Market Services and FSA, were indicted on July 27, 2010, and are scheduled to begin trial in April 2012. Three former UBS employees, Peter Ghavami, Gary Heinz and Michael Welty, were indicted on Dec. 9, 2010.”
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