Bank of America Settles Charges of Municipal Bond Market Rigging

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, Dec. 8, 2010.

Bank of America has agreed to resolve federal and state charges relating to bid-rigging and other anticompetitive activity in the municipal bonds derivatives market from 1997 to 2004, the Department of Justice (DOJ) announced.

Under the agreement, Bank of America will pay $137 million in restitution and disgorgement, and undertake certain remedial actions. Bank of America reported the activity under DOJ’s Antitrust Corporate Leniency Program, and continues to cooperate in the investigation.

The Corporate Leniency Program is designed to deter and detect anticompetitive behavior. The program allows a corporation, or individual, to avoid criminal conviction and fines if they are the first to self report the anticompetitive activity.

Assistant Attorney General Christine Varney called the settlement “unprecedented,” noting that twenty states, four federal agencies and the DOJ worked closely to resolve the matter. Under the agreement the Securities and Exchange Commission will receive $36 million in relief, the Internal Revenue Service will receive $25 million, the Office of the Comptroller of the Currency $9.2 million, and the rest will go to the 20 states.

Under the DOJ program, Bank of America will not be prosecuted for its conduct, as long as it continues to cooperate and meet all the obligations of leniency. The DOJ said the bank continues to provide “significant cooperation” to federal and state enforcement officials in their ongoing parallel investigations in the municipal bond derivatives industry.

During a conference call Varney declined to indicate whether other banks are cooperating with the government on this issue, noting only that “the investigation continues apace.”

Meanwhile, Bank of America said it was “pleased to put this matter behind it, and has already voluntarily undertaken numerous remediation efforts. Bank of America continues to cooperate with all agencies on their inquiries into practices by various companies participating in the municipal derivatives market during this time period.”