Ex-Bank of America Exec Pleads Guilty to Bid-Rigging Municipal Bonds
Phillip Murphy, a former managing director at Bank of America, pleaded guilty on Monday for his role in a wide-ranging bid-rigging scheme that set artificial prices for municipal bond investment contracts.
Wikimedia Commons Bank of America Tower, NYC
Murphy, along with the 17 other defendants to plead guilty or get convicted, defrauded cities and counties who believed they were making investment agreements with the bank that offered them the best deal. Instead, the contracts went to predetermined winners, who sent kickbacks to the broker company, CDR Financial Products, charged with running the bidding process.
"Mr. Murphy ripped off hard working American taxpayers and cash-strapped municipalities all in pursuit of his own lucre," George Venizelos, who heads the FBI's New York Field Office, said in a statement.
Cities, counties, and other public entities use these investments to raise money for various projects, like schools or parks or roads. Much of the invested money comes from municipal bonds issued to the public.
These entities often hire a financial broker to help them find the best place to put the money. The broker holds a competitive bidding process and awards the investment contract to the bank offering the best rate.
In this scheme, however, CDR selected the winners before the bidding process. CRD told Murphy and other bankers involved when to submit an intentionally losing bid and when to submit a bid that was sure to win.
"As a result of the information, various providers won investment agreements and other municipal finance contracts at artificially determined prices," the FBI's New York Field Office explained in a statement. "In exchange for this information, Murphy 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."