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DOJ Charges Against CDR Reaffirm Allegations In Muni Bond Antitrust Civil Complaint

Washington, DC October 30, 2009 – Hausfeld LLP, which represents numerous states, cities and counties that are plaintiffs in a massive municipal bond antitrust lawsuit, hails yesterday’s action by the U.S. Department of Justice charging co-defendant CDR Financial Products Inc. with participating in fraud and bid-rigging in the municipal bond market.

 

The nine-count indictment filed in New York federal court asserts that CDR and three of its executives, for a period of several years, manipulated the bidding process for municipal derivatives, accepted kickbacks from bidders, and undermined what was supposed to be a competitive bidding process.

 

“The collusion orchestrated by CDR Financial and major financial institutions extends back several years in what has become a trillion dollar a year industry victimizing dozens of states, counties and cities,” said Michael D. Hausfeld, Chairman, Hausfeld LLP. “We fully support yesterday’s action by the DOJ as it reaffirms allegations we have made against these defendants in the civil antitrust complaint, and further undermines claims made by CDR Financial that there is no basis for the case against them.”  

 

In August 2008, Hausfeld LLP – along with other co-lead counsel Boies, Schiller & Flexner LLP and Susman Godfrey LLP – filed a nationwide class action lawsuit on behalf of several state, local and municipal governments against thirty seven leading banks, insurance companies and brokers alleging widespread price-fixing and bid-rigging in the trillion dollar municipal derivatives industry dating back to 1992. The lawsuits came on the heels of an unprecedented investigation by the United States Department of Justice’s Antitrust Division, the Internal Revenue Service, and the Securities and Exchange Commission into industry-wide collusive practices in the two hundred year old municipal bond industry. An amended class action complaint was filed in June 2009.

 

Megan Jones, Partner at Hausfeld LLP, said that class counsel was not surprised by the DOJ indictment.  “Given the level of detail in our complaint, which includes paraphrased contents of tape recorded conversations among conspirators, it’s no shock to us that the DOJ (who has the tapes themselves) is coming down with indictments like this,”  said Jones. “For the hundreds of municipalities deprived of competition for these deals, this accountability is welcome news.”

 

Additional information on the Municipal Derivatives Antitrust Litigation and copies of the class action complaint can be found here. Michael Hausfeld is joined by Michael Lehmann, Robert Eisler, Megan Jones and Faris Ghareeb of Hausfeld LLP on the complaint.

 

About Hausfeld LLP

Hausfeld LLP, based in Washington, DC, is a global claimants’ law firm providing litigation services in the areas of consumer fraud, antitrust/competition law, human rights violations, product liability, civil rights, and environmental law. In addition to the Washington office, the firm has operations in New York City, Philadelphia, San Francisco, and London. For additional information about Hausfeld LLP and its services, please visit http://www.hausfeldllp.com.

 

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Key Facts In Civil Complaint

 

  • Defendants in the municipal derivatives antitrust litigation are: AIG Financial Products Corp.; AIG SunAmerica Life Assurance Co.; GE Funding Capital Market Services, Inc.; Genworth Financial Inc.; JP Morgan Chase & Co.; Bear, Stearns & Co., Inc.; Société Générale SA; UBS AG; Lehman Brothers Inc.; Merrill Lynch & Co. Inc.; Morgan Stanley; Wachovia Bank N.A.; Natixis S.A.; Financial Security Assurance Holdings, Ltd.; Financial Security Assurance, Inc.; Financial Guaranty Insurance Company; Trinity Funding Co. LLC; Piper Jaffray & Co.; Security Capital Assurance Inc.; XL Asset Funding Company LLC; XL Life Insurance & Annuity, Inc.; National Westminster Bank plc; or Bank of America N.A.
  • Municipal derivatives are used to invest the proceeds of municipal bonds. Because municipal bonds commonly fund multi-year public works projects, most of their proceeds cannot be spent immediately, and must be invested to earn interest until they are ripe for use. These investment vehicles are known as municipal derivatives, an umbrella term that refers to various tax-exempt vehicles, including guaranteed investment contracts, advance refunding escrows, swaps, options, swaptions, collars, and floors.
  • As a result of this conspiracy, the plaintiffs and other class members were deprived of extra money they otherwise would have received from their municipal bond investments and could have spent on important public works projects such as roads, buildings, and mass transit.
  • The lawsuits also follow Bank of America’s conditional acceptance into the Antitrust Division’s amnesty program, in connection with which there was disclosure of information regarding the conspiracy described below and the promise to provide full and complete cooperation to the Antitrust Division and the plaintiffs and the class they seek to represent.

Practice Areas: Antitrust / Competition, Securities and Financial Services