October 19, 2021

3 Former UBS Bankers Sentenced for Bid-Rigging

Gary Heinz, 40, a former bank vice president who was caught on recordings discussing the scheme, received the longest prison sentence, a term of 27 months. Judge Kimba M. Wood of Federal District Court in Manhattan also ordered Mr. Heinz to pay a $400,000 fine.

Peter Ghavami, 45, who left UBS in 2007 as global head of commodities, was sentenced to 18 months in prison and ordered to pay a fine of $1 million. Michael Welty, 49, a former vice president, was sentenced to 16 months and ordered to pay a $300,000 fine.

“We’re very pleased at the outcome and we feel that justice was done,” said Charles A. Stillman, a lawyer for Mr. Ghavami.

Prosecutors said the bankers had steered financial contracts to their friends in exchange for kickbacks and other favors from 2001 to 2006, while falsely certifying that the processes were competitive.

A federal jury convicted all three former bankers last August of conspiring to defraud municipal bond issuers and also convicted Mr. Ghavami and Mr. Heinz of wire fraud. UBS agreed in 2011 to pay $160 million in restitution, penalties and disgorgement for the scheme.

Prosecutors had sought sentences of at least 19 and a half years for Mr. Heinz, at least 17 and a half years for Mr. Ghavami and at least 11 years and three months for Mr. Welty.

Judge Wood cut the range of potential sentences for all three on Wednesday, saying that their criminal behavior was aberrational from their otherwise law-abiding lives, and because the victims have been “compensated highly” by the UBS settlement.

Kalina M. Tulley, a lawyer at the Justice Department’s Antitrust Division, said Judge Wood’s reduction in sentencing ranges “greatly underestimates the seriousness of the offense.”

“These were municipalities that were looking to invest the taxpayers’ money,” Ms. Tulley pleaded with Judge Wood, to no avail, in a courtroom filled with the bankers’ friends and families. “These defendants abused that trust.”

Mr. Ghavami, a Belgian national, was the first of three former members of UBS’s municipal securities desk to be sentenced.

“I’ve always tried to conduct my life with integrity and consideration,” Mr. Ghavami told the judge before apologizing to affected municipalities and his wife, Julie, and daughter, Athena. “All I want to do is to protect Julie and Athena from harm and to get to the point where we can be a family again.”

Mr. Ghavami will be deported to Belgium after serving his sentence at a low-security federal prison. Mr. Heinz and Mr. Welty are eligible to serve their sentences at a minimum security camp, an option not available to Mr. Ghavami because he is not an American citizen.

The Justice Department charged Mr. Heinz, Mr. Ghavami and Mr. Welty in 2010 as part of its broad investigation of the $3.7 trillion municipal bond market, in which at least 19 people have been convicted or pleaded guilty.

“For years, these executives corrupted the competitive bidding process and defrauded municipalities across the country for important public works projects,” Scott D. Hammond, deputy assistant attorney general of the antitrust division’s criminal enforcement program, said in a statement after the sentencings. “The division will continue to prosecute those who subvert and corrupt competitive markets for personal profit.”


Article source: http://www.nytimes.com/2013/07/25/business/3-former-ubs-bankers-sentenced-for-bid-rigging.html?partner=rss&emc=rss

Wegelin Ordered to Pay $74 Million in Tax Plea

LONDON — Wegelin Co., Switzerland’s oldest private bank, said Tuesday it was ordered by a U.S. judge to pay a total of $74 million after pleading guilty to violating U.S. tax laws by helping Americans evade taxes.

The bank, which was founded in 1741, said U.S. District Judge Jed S. Rakoff in New York ruled that the fine, which had been agreed upon earlier with the prosecution, was appropriate. The sum includes fines, restitution and forfeiture proceeds and will be paid from funds the bank had set aside for legal proceedings.

Wegelin, which said it would soon shut down, said it was “pleased” about the ruling and that the case, which started a year ago, was now closed.

The Wegelin case was part of the Obama administration’s sweeping crackdown on Americans who use offshore banks to evade taxes.

Wegelin had acknowledged claims that it hid more than $1.2 billion in secret accounts for American clients. Its guilty plea, entered in January, marked the first time a foreign financial institution had pleaded guilty to U.S. tax law violations.

As part of the push to eliminate tax cheats, a U.S. grand jury in New York indicted Wegelin in February 2012. The company’s elaborate scheme involved its Swiss bankers’ opening secret accounts for U.S. clients using code names and setting up sham entities to avoid detection in far-flung locales, including Panama and Liechtenstein.

In 2009, UBS, another Swiss bank, avoided criminal charges by striking a so-called deferred prosecution agreement in which it paid a $780 million fine and turned over the names of about 4,500 clandestine accounts believed to hold the assets of American taxpayers.

Peter Lattman contributed reporting from New York.

Article source: http://www.nytimes.com/2013/03/06/business/global/06iht-wegelin06.html?partner=rss&emc=rss

Claiming Fraud in A.I.G. Bailout, Whistle-Blower Lawsuit Names 3 Companies

The lawsuit, filed by a pair of veteran political activists from the La Jolla area of San Diego, asserts that A.I.G. and two large banks engaged in a variety of fraudulent and speculative transactions, running up losses well into the billions of dollars. Then the three institutions persuaded the Federal Reserve Bank of New York to bail them out by giving A.I.G. two rescue loans, which were used to unwind hundreds of failed trades.

The loans were improper, the lawsuit says, because the Fed made them without getting a pledge of high-quality collateral from A.I.G., as required by law.

“To cover losses of those engaged in fraudulent financial transactions is an authority not yet given to the Fed board,” said the plaintiffs, Derek and Nancy Casady, in their complaint, filed in Federal District Court for the Southern District of California.

The lawsuit names A.I.G., Goldman Sachs and Deutsche Bank as defendants, but not the Fed.

Senior Fed officials have stated repeatedly that they had to take unusual steps in 2008 because the global financial system was close to breaking down. The Casadys’ lawyer, Michael J. Aguirre, argued that even so, the Fed was required to comply with its own governing statutes. He said that when the Fed bailed out a nonbank, it was required to secure the loan with the same liquid, high-quality collateral it required when lending to a troubled bank.

A spokesman for A.I.G., Mark Herr, said the Casadys’ lawsuit was “devoid of merit” and said Mr. Aguirre appeared to be recycling old and discredited legal theories.

Separately, A.I.G. is now among the companies turning to the courts in hopes of recovering losses from 2008, and seeking restitution from some banks.

A spokesman for Goldman Sachs said he was not familiar with the Casadys’ lawsuit and could not comment on it. A spokeswoman for Deutsche Bank declined to comment.

The litigation shines a critical light on the Federal Reserve’s on-again-off-again power to bail out nonbanking institutions like Wall Street firms and insurance companies. The Fed first got that authority during the Great Depression, but Congress revoked it in 1958. And then, as the legal walls between banking and other financial services began to fall in the 1990s, Congress once again gave the Fed the power to make emergency loans to nonbanks.

The relevant language is contained in a single, murky sentence inserted in a bill passed the day before Thanksgiving in 1991, as members of Congress were rushing to catch their flights home. Former Senator Christopher Dodd added it at the request of Goldman Sachs and other Wall Street firms, which were still stinging from a major market crash in 1987 and eager to empower the Fed to step in if a similar problem happened again.

The Casadys’ lawsuit says the resulting law needs judicial review because it went flying through Congress with little debate and now appears to be feeding high-risk behavior. Investors in nonbanks now expect that the Fed will open a safety net to catch them, should they falter, the suit contends.

“Congress did not show a legislative intent to convert the Federal Reserve into a bank for bailing out failed speculators,” the complaint asserts.

The suit was filed under the False Claims Act, a federal law that permits private citizens to sue on behalf of government agencies if they believe they have knowledge of a fraud. The law gives people a chance to try to recover money for the government and, by extension, the taxpayers. Plaintiffs who succeed typically get a percentage.

Although the bailout of A.I.G. took place over many months and involved a total commitment of $182 billion, the lawsuit focuses on just part of it — two emergency loans, totaling about $44 billion, made at the end of October 2008. The money was used to settle trades involving two big blocks of complex, mortgage-linked securities, some of which were underwritten by Goldman Sachs and Deutsche Bank, and guaranteed by A.I.G.

When A.I.G. went into a free fall in 2008, the Fed extended the two loans to buy up the troubled securities and put them into two special-purpose vehicles, Maiden Lane II and Maiden Lane III, for holding until the turmoil subsided. Earlier this year, the Fed allowed some of the impaired assets to be sold to undisclosed purchasers.

The Casadys say the Fed erred in making the loans, because it needed a pledge of high-quality collateral from A.I.G. and instead got a big portfolio of impaired assets.

Article source: http://feeds.nytimes.com/click.phdo?i=474e471bcc5aafe23c6590fd5348042d

UBS to Pay $160 Million to Settle Bid-Rigging Claims

WASHINGTON (AP) — The Swiss banking giant UBS has agreed to pay $160 million to resolve accusations of rigging the bidding process to win investment business from cities and towns in 36 states.

Federal and state officials announced the settlements Wednesday. The Justice Department said that UBS had admitted and had accepted responsibility for illegal, anticompetitive conduct by former employees from 2001 through 2006.

The local governments were looking to invest their proceeds from municipal bond sales. The former UBS employees manipulated the bidding process and at times paid kickbacks to bidding agents who collect proposals for government business, the Justice Department and the Securities and Exchange Commission said.

The $160 million is being paid as restitution and penalties to federal and state agencies. Because UBS admitted to the conduct and cooperated, it will nott being prosecuted.

Article source: http://feeds.nytimes.com/click.phdo?i=eecbd34a1dd38a6dcd16ebd41ec1250e