By Kirsten Valle Pittman, McClatchy Newspapers –
CHARLOTTE, N.C. — A former Bank of America Corp. executive has been indicted for his role in a bid-rigging scheme that played out at the Charlotte bank and other major lenders, the U.S. Department of Justice announced Friday.
The indictment filed in federal court in Charlotte charges Phillip D. Murphy with participating in a wire fraud scheme and separate fraud conspiracies from as early as 1998 through 2006. The scheme involved bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts.
Murphy, who did not immediately return messages seeking comment, served as a managing director in the tax-exempt derivatives group at Bank of America, according to his biography on the website of the California-based advisory firm where he is now listed as a principal.
The firm describes him as “one of the pioneers of the municipal derivative and investment agreement business, having developed or improved many of the structures being used in the market today.”
Records from the Financial Industry Regulatory Authority show Murphy worked in Bank of America’s securities unit from 1998 to 2002 and that he had been under investigation for years by several regulatory agencies. Bank spokesman Bill Halldin declined to comment.
The charges are related to a widespread government investigation of the U.S. municipal bond market.
In December 2010, four federal agencies and 20 states announced a sweeping $137 million settlement with Bank of America for its role in a scheme authorities said defrauded state agencies, cities and nonprofits that sought to invest with banks the millions they borrowed through bond offerings for hospitals, apartment complexes and other projects.
The settlement was the result of a 2007 leniency agreement the bank reached with the justice department that spared it from criminal prosecution. Bank of America, which officials said was the first and only company to self-report its activities in the case, paid restitution but no fines.
Other banks, including Wells Fargo & Co., which bought Charlotte’s Wachovia in 2008, have reached similar settlements.
The three-count indictment filed Thursday alleges that Murphy conspired with a California-based broker of municipal finance contracts and others to increase the number and profitability of investment agreements and other contracts awarded to the company where he worked.
Murphy submitted intentionally losing bids for certain investment agreements in exchange for information about the process and sometimes arranged for kickbacks for the broker and other co-conspirators, authorities said. He also told municipal issuers and others the bidding process complied with U.S. Treasury regulations when it didn’t, the indictment said.
“Yesterday’s charges outline a fraudulent scheme to subvert competition in the marketplace,” said Janice Fedarcyk of the FBI, one of several agencies assisting the justice department’s Antitrust Division with the investigation. “Those who engage in this type of criminal activity not only stand to defraud public entities, but erode the public’s trust in the competitive bidding process.”
Murphy is charged with two counts of conspiracy and one count of wire fraud. He faces a maximum penalty of at least 30 years in prison and maximum fines of more than $1.5 million stemming from the three counts.
The charges announced Friday were part of an ongoing investigation conducted by the Antitrust Division and other agencies. Thirteen people and one company have pleaded guilty to charges stemming from the probe, authorities said.
