Bank of America agreed on Tuesday to pay $137.3 million in restitution to federal and state agencies for its role in a conspiracy to rig bids in the municipal bond derivatives market and as a condition of its admission to a Justice Department leniency program allowing it to avoid criminal convictions and fines.
Justice Department officials said the bank agreement involved the U.S. Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS), the Office of the Comptroller of Currency (OCC) and 20 state attorneys general and included the payment of restitution to the IRS and to municipalities harmed by the bank’s “anti-competitive conduct in the municipal bond derivatives market.”
According to the agreement, Bank of America employees engaged in illegal conduct, including bid rigging and other deceptive practices, in connection with the marketing and sale of tax-exempt municipal bond derivatives contracts.
Justice Department officials said the bank was the first and only one to come forward and report its wrongdoing to the department before an investigation began into anti-competitive conduct in the municipal bond derivatives industry. The department’s ongoing investigation has resulted in charges against seven executives and one corporate entity and guilty pleas by eight executives for antitrust and related federal crimes. The investigation remains active.
“The Department of Justice’s Antitrust Corporate Leniency Program is essential to our criminal enforcement of the antitrust laws,” said Assistant Attorney General Christine A. Varney, who heads the department’s antitrust division. “Bank of America’s disclosure of wrongdoing and cooperation has led to an aggressive, ongoing investigation by the Department of Justice into anti-competitive activity in the municipal bond derivatives industry.
“The bank’s participation in the leniency program has also resulted in today’s resolution to address the harm caused by its wrongdoing,” Ms. Varney said. “The division’s investigation of this matter continues, and the prosecution of anti-competitive conduct in the financial markets remains our highest priority.”
As a condition of its admission to the corporate leniency program, Bank of America was required to be the first entity to self-report the anti-competitive conduct, acknowledge its wrongdoing, provide cooperation in the investigation and make full restitution to the victims.
Justice Department officials said the bank continues to provide significant cooperation to federal and state authorities in their parallel investigations in the municipal bond derivatives industry.
The Antitrust Corporate Leniency Program is designed to deter and detect anti-competitive behavior.
With the agreements announced Tuesday, Justice Department officials said Bank of America has met its obligation under the leniency program to pay full restitution to the IRS and municipalities based on anti-competitive conduct identified by the federal and state agencies.
They said the bank’s agreements with the SEC, IRS, OCC and state attorneys general represent the “substantial benefits for victims that can result from the Department of Justice’s Antitrust Corporate Leniency Program, and reflect Bank of America’s commitment to address the harm caused by the conduct it discovered.”
As a result of its voluntary disclosure and ongoing cooperation, Bank of America will not be required to pay penalties as a part of the agreements. After the successful completion of cooperation and other requirements of the program, the bank and its current employees who have cooperated in the investigation will not be prosecuted by the antitrust division for the reported conduct.
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Jerry Seper is the investigative editor for The Washington Times.
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