This is a photo of the National Register of Historic Places listing with reference number 7000063
Thursday, May 21, 2015
FORMER BOA EXEC SENTENCED TO SERVE 26 MONTHS IN PRISON FOR CONSPIRACY AND FRAUD
FROM: U.S. JUSTICE DEPARTMENT
FORMER BANK OF AMERICA EXECUTIVE SENTENCED TO SERVE
26 MONTHS IN PRISON FOR ROLE IN CONSPIRACY AND FRAUD INVOLVING INVESTMENT CONTRACTS FOR MUNICIPAL BOND PROCEEDS
WASHINGTON — A former Bank of America executive was sentenced today for his participation in a conspiracy and scheme to defraud related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced today.
Phillip D. Murphy, the former managing director of Bank of America’s municipal derivatives group from 1998 to 2002, was sentenced to serve 26 months in prison by U.S. District Judge Max O. Cogburn Jr. of the U.S. District Court of the Western District of North Carolina.
On Feb. 10, 2014, Murphy pleaded guilty to participating in multiple fraud conspiracies and schemes with various financial institutions and brokers from as early as 1998 until 2006. Bank of America and other financial institutions, acting as “providers,” offered a certain type of contract – known as an investment agreement – to state, county and local governments and agencies, and not-for-profit entities, throughout the United States. These public entities sought 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. Public entities typically hire a broker to assist them in investing their money and to conduct a competitive bidding process to determine the winning provider.
“Individual accountability is the cornerstone of protecting the integrity of our financial markets,” said Deputy Assistant Attorney General Brent Snyder of the Antitrust Division’s Criminal Enforcement Program. “This sentence is a result of our continued resolve to vigorously prosecute bank executives whose greed and illegal schemes undermine our free and fair financial markets.”
According to court documents, Murphy conspired with employees of Rubin/Chambers Dunhill Insurance Services Inc., also known as CDR Financial Products, a broker of municipal contracts, and others. Murphy also pleaded guilty to conspiring with others to make false entries in the reports and statements originating from his desk, which were sent to bank management. Murphy conspired with CDR and others to increase the number and profitability of investment agreements and other municipal finance contracts awarded to Bank of America. Murphy won investment agreements through CDR’s manipulation of the bidding process in obtaining losing bids from other providers, which is explicitly prohibited by U.S. Treasury regulations. As a result, various providers won investment agreements and other municipal finance contracts at artificially determined prices. Murphy also submitted intentionally losing bids for certain investment agreements and other contracts when requested, and, on occasion, agreed to pay or arranged for kickbacks to be paid to CDR and other co-conspirator brokers.
In conjunction with the bid rigging, Murphy and his co-conspirators submitted numerous intentionally false certifications that were relied upon by both municipalities and the Internal Revenue Service (IRS). These false certifications misrepresented that the bidding process had been conducted in a competitive manner that was in conformance with U.S. Treasury regulations. These false certifications caused municipalities to award contracts to Bank of America and other providers based on false and misleading information. The false certifications also impeded and obstructed the ability of the IRS to collect revenue owed to the U.S. Treasury.
“We trust those in positions of leadership and power to do the right thing when it comes to taking care of our money,” said Chief Richard Weber of the IRS’s Criminal Investigation. “When that trust is broken through these types of criminal activities, than those individuals need to be held accountable. Today's sentencing reflects our commitment to ensuring fairness for those engaged in these types of investments.”
“By knowingly exploiting vulnerabilities in the bidding process, Murphy ignored policies put in place to allow for the ethical distribution of municipal bond proceeds,” said Assistant Director in Charge Diego Rodriguez of the FBI’s New York Field Office. “In the end, he brokered a deal that served his own best interests. Today’s sentence is proof of our continued determination to root out those whose business practices contribute to the deterioration of healthy competition in the municipal bidding process.”
Including Murphy, 17 individuals and one corporation have been convicted or pleaded guilty as a result of the Antitrust Division’s municipal bonds investigation.
The sentence announced today resulted from an investigation conducted by the Antitrust Division’s New York Office, the FBI and IRS-CI. The division also coordinated its investigation with the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York. The U.S. Attorney’s Office of the Western District of North Carolina provided valuable assistance in this matter.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,900 mortgage fraud defendants.
Wednesday, May 20, 2015
CFTC COMMISSIONER WETJEN'S STATEMENT BEFORE GLOBAL MARKETS ADVISORY COMMITTEE MEETING
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
Opening Statement by Commissioner Mark Wetjen before the CFTC’s Global Markets Advisory Committee Meeting
May 14, 2015
Thank you everyone for participating today. I would like to welcome Chairman Massad, Commissioner Bowen, and Commissioner Giancarlo, and extend a special warm welcome to our expert panelists.
Our panelists join us from around the globe and include:
David Bailey from the Bank of England;
Fabrizio Planta from the European Securities and Markets Authority;
Shunsuke Shirakawa from Japan’s Financial Services Agency;
Jeffrey Marquardt from the Federal Reserve; and
Sean Campbell from the Federal Reserve.
Also joining us today are staff members from the CFTC:
Bob Wasserman;
Carlene Kim; and
Paul Schlichting.
And I want to extend my welcome to the GMAC members and thank you again for convening today to discuss the topics of central counterparty (CCP) risk management, and the CFTC’s cross-border application of its margin rule for uncleared swaps.
Before I turn to Chairman Massad and the other commissioners, I want to make a couple of brief remarks.
Importance of the Clearing Market Structure
Clearinghouses are at the heart of the new market structure for cleared swaps. As we all know, the G20 recommended that this structure be implemented around the globe, and I strongly supported this effort at the CFTC.
Importantly, in the aftermath of the G20 communique, market regulators around the globe, including the CFTC, have raised significantly the standards that CCPs must meet for authorization to do business. Considerable international coordination of this effort was facilitated through the work of CPMI-IOSCO.
Clearinghouses registered with the CFTC now have enhanced financial-resource and liquidity requirements, as well as other risk management standards, that reflect their heightened role in the marketplace.
I recognize, however, that as clearing volumes increase, we need to be cognizant of, and effectively address, the resulting increased concentration of risk in the cleared space. Many market participants and stakeholders have rather vocally expressed concerns about this.
To maintain consensus behind the cleared market structure, it is important for policy makers to provide a forum to discuss the aforementioned concerns, and review whether further enhancements should be considered. That is why today’s meeting has been convened.
Today’s meeting presents an opportunity to sharpen our thinking about whether and how to further improve the cleared market structure, and how to keep pace with marketplace and technological advancements, especially as they relate to CCPs. In particular, today’s agenda focuses on the framework for conducting CCP stress tests, and the appropriate scaling of CCP capital within a CCP’s default waterfall.
Global coordination on these issues is particularly crucial. That is why I am grateful to have David, Fabrizio, and Shunsuke here today to give us their perspectives. Your contributions to today’s debate, as well as any subsequent policy development in your home countries, are highly relevant, important, and appreciated.
I should also add that, even though there remains some uncertainty about how different jurisdictions will treat one another’s CCPs more generally on a going forward basis, it’s important to pursue an open dialogue like the one today, or the ones we experienced earlier this year at Commissioner Bowen’s Market Risk Advisory Committee meeting and the CFTC staff roundtable.
I see only benefits to having an open dialogue like the one today between regulators and market participants, which will enhance a mutual understanding in the official sector, and lead to better policy outcomes.
Margin for Uncleared Swaps
I also look forward to hearing the views of our panelists and GMAC members regarding the application of the CFTC’s margin rule to cross-border swaps, and swaps between affiliates.
Last fall the commission issued an advanced notice of proposed rulemaking that laid out three different cross-border approaches it could take. The comment file appears to heavily favor an approach that mirrors the one proposed by the prudential regulators, which relies on the availability of substituted compliance but also applies U.S. jurisdiction to more firms and transactions than the CFTC’s cross-border guidance. Today’s discussion will help the commission understand better the relative merits of these approaches and clarify which approach to pursue.
Again, thank you for being here today, and I look forward to our discussion.
Last Updated: May 14, 2015
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