WASHINGTON (AP) — A politically connected financial firm and its founder pleaded guilty Friday to taking part in fraud and bid-rigging conspiracies related to the municipal bond business.
The Justice Department said CDR Financial Products Inc. of Beverly Hills, Calif., and owner David Rubin entered guilty pleas in federal court in Manhattan. The department said they acknowledged their roles in schemes designed to win contracts to invest the proceeds of municipal bonds issued by state, county and local governments.
Rubin faces up to 20 years in prison.
Two other CDR executives are scheduled to go on trial in New York next week.
CDR also was investigated for its ties to former New Mexico Gov. Bill Richardson and business the company won in that state. No charges grew out of that investigation.
Rubin is the tenth person to plead guilty to criminal charges in the ongoing federal investigation of the municipal bonds industry, the department said. Eight others have been charged, including the two CDR executives.
The government so far has recovered $743 million in restitution and penalties from five banks, Bank of America Corp., UBS AG, JPMorgan Chase and Co., GE Funding Capital Market Services Inc. and Wachovia Bank, since acquired by Wells Fargo and Co.
Municipal bonds are issued to build schools, hospitals and roads in a $2.8 trillion market. About $100 billion of the proceeds from the bond sales each year are temporarily invested before being used for the original purpose of the sales.
The government launched a widespread investigation into the business of reinvesting municipal bond proceeds after Bank of America came forward and disclosed to authorities that its investment division paid for information that helped the bank gain an advantage with local governments that were looking to invest their proceeds from municipal bond sales. Because nearly all the municipal bonds involved were tax-exempt, they are regulated by the Internal Revenue Service.
In the CDR case, Rubin admitted that over eight years beginning in 1998, he provided information to financial institutions and insurance companies that helped win bids, intentionally solicited losing bids and also paid kickbacks in what was supposed to be a competitive situation, Justice said.
Rubin’s guilty plea follows his failed effort to delay his trial because of his wife’s worsening medical condition. In court papers, Rubin said Gail Rubin is in the final stages of a long fight with pancreatic cancer and asked to put off his trial until 35 days after her death. The Rubins have been married 26 years and have seven children, according to court papers.
U.S. District Judge Victor Marrero denied the request, a decision upheld by a panel of federal appellate judges in New York. Rubin and CDR, also known as Rubin/Chambers, Dunhill Insurance Services Inc., were first indicted in 2009.