Bloomberg News

Ex-CDR Financial Employees Get Jail for Muni Bid-Rigging

April 11, 2013

Three former employees of CDR Financial Products Inc. who cooperated with the government’s investigation into municipal bond bid-rigging were given prison terms ranging from six months to 18 months.

U.S. District Judge Harold Baer Jr. today sentenced CDR’s former chief financial officer Z. Stewart Wolmark, ex-vice president Evan Zarefsky and former employee Matthew Rothman in separate hearings in Manhattan federal court. Wolmark got 18 months in prison, Zarefsky eight and Rothman six.

CDR was hired by public entities that issue municipal bonds to act as their broker and conduct a competitive bidding process for investing bond proceeds, according to prosecutors. Instead, some employees of Beverly Hills, California-based CDR took kickbacks for running sham auctions, prosecutors said.

CDR and another of its former chief executive officers, David Rubin, pleaded guilty in the bid-rigging scheme in December 2011. Rubin is scheduled to be sentenced June 28.

Prosecutors said Rubin took kickbacks for running sham auctions for investments. He faces as long as 35 years in prison and a fine of as much as $1.5 million, the U.S. said. CDR could be fined as much as $101 million. The fines may be increased to twice the amount gained from the crime or double the loss to victims, the government said.

Illegal Activity

Bank of America Corp., (BAC:US)JPMorgan Chase & Co. (JPM:US), UBS AG, (UBSN) Wells Fargo & Co. (WFC:US) and General Electric Co. (GE:US) have all acknowledged that former employees engaged in illegal activity in connection with municipal bond bidding.

In August, former UBS AG managing director and two former colleagues were convicted of bid-rigging. Former CDR employee Douglas Goldberg, who has also pleaded guilty, testified in Ghavami’s trial that the UBS municipal derivatives group paid CDR 10 to 15 times in exchange for help with rigging bids.

Three former General Electric Co. bankers, Dominick Carollo, Steven Goldberg and Peter Grimm, were found guilty in May of conspiracy to commit fraud by manipulating actions for municipal bond investment deals.

The case is U.S. v. Rubin/Chambers, Dunhill Insurance Services Inc., 09-cr-01058, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in New York federal court at rvanvoris@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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