JPMorgan Chase has become the third major bank to settle charges of improperly gaining access to the local bond business of local governments.

 

The Securities and Exchange Commission, the Internal Revenue Service, bank regulators and 25 state attorneys general accused JPMorgan of rigging the bidding process by which cities select financial institutions to reinvest proceeds of municipal bond transactions. Without admitting guilt or wrongdoing, JPMorgan agreed to pay $211 million to resolve the case against it, which included allegations of secretly working with bidding agents to get a “last look” at bids submitted by its competitors, in order to undercut them and win the cities’ business.

 

Nearly $130 million of the settlement will go towards municipalities that were harmed by the bank’s actions. JPMorgan’s misdeeds involved 93 transactions from 1997-2005. The settlement comes on the heels of another settlement last month in which it agreed to pay $153.6 million to resolve accusations that it misled investors in a 2007 mortgage securities transaction.

 

JPMorgan can afford the payments. The company made more than $17 billion in profits last year.

 

One former JPMorgan official, James Hertz, has been banned by the government from ever working in the municipal finance industry again, after pleading guilty to conspiracy and wire fraud charges related to the bid-rigging scheme.

 

Prior to JPMorgan settling, Bank of American agreed to pay $137 million to settle similar fraud charges, as did UBS for more than $150 million.

-Noel Brinkerhoff

 

JPMorgan Settles Bond Bid-Rigging Case for $211 Million (by Eric Dash, New York Times)

JPMorgan Pays $211M to Settle Bid-Rigging Charges (by Daniel Wagner, Associated Press)

JPMorgan Fined 0.9% of Profits for Helping to Destroy Global Economy (by Alain Sherter, CBS Business Network)