It's being called one of the longest running, most economically pervasive antitrust conspiracies ever uncovered in the U.S. For nearly two years, the DOJ, the IRS and the SEC have been probing industrywide collusive practices in the municipal bond industry.
Now Fairfax County, Va., the State of Mississippi and the City of Chicago, among other plaintiffs, have filed two nationwide class action lawsuits against 37 leading banks, insurance companies and brokers. The suits allege widespread price-fixing and bid-rigging in the multibillion-dollar municipal derivatives industry dating back to 1992. Plaintiffs in the suits, filed March 12 in the U.S. District Court for the District of Columbia, are seeking to recover treble damages.
"What plaintiffs alleged here is that the brokers and banks conspired to rig those bids so that instead of getting the kind of interest the municipalities and other public entities would enjoy in a competitive market, they were getting less," says Michael Lehmann, a partner at Cohen Milstein Hausfeld & Toll, one of the firms representing the plaintiffs. "In a competitive marketplace, providers would be expected to compete against each other for an issuer's business on the basis of the highest rate of return."
In seeking amnesty, Bank of America made use of statutes that provide for lesser penalties in civil and criminal prosecutions for the entity to first report the misconduct.