Kathleen G. Kane - Pennsylvania Office of Attorney General - Protecting Pennsylvanians

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January 29, 2013

$8.6 million distributed to PA municipalities and non-profits as part of national bid-rigging settlement

HARRISBURG - Attorney General Kathleen G. Kane today announced that distribution is underway for more than $8.6 million in restitution to Pennsylvania municipalities and non-profit organizations who were victimized as part of a large-scale bid-rigging case involving major financial institutions.

Kane said the scheme involved the marketing and sale of municipal derivative investments, which are often used by government agencies and non-profit groups to reinvest the proceeds of tax-exempt bonds until those funds are needed.

According to the continuing national investigation, a number of banks, brokers and financial service firms manipulated the bidding process and shared information - causing victims to pay higher fees and receive lower interest rates.

Kane said that the scheme took advantage of state agencies, local governments, public school districts and non-profit organizations that were attempting to invest or protect the proceeds of tax exempt bonds.

Multi-state settlements have been reached over the past year with five major institutions: Bank of America ($67 million), JPMorgan Chase ($92 million), Wachovia ($58.75 million), Union Bank of Switzerland ($90.8 million) and GE Funding Capital Market Services ($34.25 million). The settlement funds will compensate Pennsylvania victims for their losses, returning the funds they should have received when they initially made their investments. 

The JPMorgan Chase settlement resulted in numerous six-figure or seven-figure payments to Pennsylvania institutions, including nearly $1.9 million for the Pennsylvania Intergovernmental Cooperation Authority, in Philadelphia; $1.4 million for the Bethlehem Area School District; $435,197 for the Philadelphia Gas Works; $631,471 for the Geisinger Health System Foundation, in Danville, Montour County; $230,937 for the Harrisburg Authority; and $197,636 for the North Penn Water Authority, in Lansdale, Montgomery County. Other payments range in size from $1,300 to more than $100,000.

Kane said these multi-state settlements are part of a coordinated national investigation involving state attorneys general and numerous federal agencies, including the Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS), and the U.S. Department of Justice.

The Pennsylvania portion of the case was handled by Acting Executive Deputy Attorney General James A. Donahue III and Senior Deputy Attorney General Joseph S. Betsko, of the Attorney General's Antitrust Section.

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