NEWARK (CN) – UBS Financial Services will pay $160 million to settle charges that it rigged 100 or more municipal bond reinvestment deals in 26 states. UBS will pay $47 million to “the affected municipalities” to settle SEC charges, and another $113 million to settle parallel state and federal complaints.
The SEC announced the settlements Wednesday afternoon. It claims that UBS’s frauds undermined the competitive bidding process from 2000 to 2004, affecting the prices the cities paid for the reinvestments.
“Its fraudulent conduct … also jeopardized the tax-exempt status of billions of dollars in municipal securities because the supposed competitive bidding process that establishes the fair market value of the investment was corrupted,” the SEC said in a statement.
“UBS played various roles in these tainted transactions,” the SEC added. “UBS illicitly won bids as a provider of reinvestment products, and also rigged bids for the benefit of other providers while acting as a bidding agent on behalf of municipalities. UBS at times additionally facilitated the payment of improper undisclosed amounts to other bidding agents. In each instance, UBS made fraudulent misrepresentations or omissions, thereby deceiving municipalities and their agents.”
The chief of the SEC’s Municipal Securities and Public Pension Unit said in the statement: “Our complaint against UBS reads like a ‘how-to’ primer for bid-rigging and securities fraud. They used secret arrangements and multiple roles to win business and defraud municipalities through the repeated use of illegal courtesy bids, last looks for favored bidders, and money to bidding agents disguised as swap payments.”
As is customary in these cases, UBS will cough up the money without admitting that it did anything wrong. The agreement is subject to court approval.
Bank of America agreed to pay $137 million in similar SEC, state and federal cases in December 2010.