(CN) – A Beverly Hills-based financial firm and its owner pleaded guilty to federal charges of rigging bids and auctions in the municipal bond market.
Prosecutors in Manhattan said David Rubin, 50, CEO of CDR Financial Products Inc., took kickbacks for running sham auctions.
“Mr. Rubin and his firm were trusted with public money and confidence to assist municipalities with issuing bonds,” an FBI spokeswoman said in a statement. “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.”
Rubin and CDR, along with Zevi Wolmark, former CFO and managing director of CDR, and Evan Zarefsky, a vice president of CDR, were indicted in October 2009. The trial for Wolmark and Zarefsky is scheduled to begin Wednesday.
Rubin and CDR pleaded guilty to participating in bid-rigging and fraud conspiracies with financial institutions and insurance companies and their representatives. These “providers” offered investment agreements to state, county and local governments and agencies that sought to invest proceeds of municipal bonds they had issued to raise money for public projects.
Rubin and CDR also pleaded guilty to wire fraud.
According to court records, CDR was hired by public entities that issue municipal bonds to act as their broker and conduct competitive bidding for contracts for investment of municipal bond proceeds. Rubin admitted that from 1998 until 2006 he and coconspirators supplied information to providers to help them win bids, solicited intentionally losing bids, and signed certifications that contained false statements on whether the bidding process complied with Treasury regulations.
Rubin also admitted that he and coconspirators solicited fees from providers, which were in fact payments to CDR for rigging or manipulating bids for investment agreements so that a particular provider would win that agreement at an artificially determined price.
Rubin faces up to 10 years in prison and a $1 million fine on the bid-rigging charge, up to five 5 and a $250,000 fine on the fraud conspiracy charge and up to 20 years and a $250,000 fine on the wire fraud charge.
CDR faces up to a $100 million fine on the bid-rigging charge and up to $500,000 on the fraud conspiracy and wire fraud charges.
“Mr. Rubin has accepted responsibility for his conduct and has pled guilty,” defense attorney Bradley Simon told Bloomberg News. “Mr. Rubin will now be able to direct all of his energies to caring for his wife and family during this critical time.”
Rubin tried unsuccessfully to have the trial postponed because his wife is in the final stages of terminal cancer.
Rubin, who began sobbing at the mention of his wife in the hearing last week, will be sentenced April 27. He is free on bail.
This is the latest in a string of prosecutions and settlements involving bid rigging in municipal bonds.