Former Financial Execs Charged in Fraud Case

By Steve Rensberry

   (RPC) - 7/27/2010 - If you were among several bidders on a municipal finance contract or bond and were able to have one last look from the broker at all the other bids that had been placed, before placing your own bid, would it give you an advantage? Of course it would, but it may also land you in jail as a clearly prohibited act under U.S. treasury regulations.
   And what if your "wink wink" agreement with said broker went even further, such as agreeing to place an occasional losing bid in exchange for a financial kick-back or two for the broker and some of his friends?
    Such is exactly the case with a 12-count indictment filed on July 27 in U.S. District Court in New York City against three former financial executives, Domonick P. Carollo, Steven E. Goldberg and Peter S. Grimm, involving investment contracts for the proceeds of municipal bonds. Each had once worked in association with General Electric Co.
   The ongoing investigation and subsequent action stems from efforts of the Financial Fraud Enforcement Task Force begun under U.S. President Barack Obama. This particular investigation involved the Antitrust Division's New York Field Office, IRS Criminal Investigation and the Federal Bureau of Investigation, in coordination with the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.
   "To date, four individuals have pleaded guilty in relation to this investigation. In addition, on Oct. 29, 2009, CDR (Rubin/Chambers, Dunhill Insurance Services Inc.), two of its employees and one former employee were indicted and charged with participating in bid-rigging and fraud conspiracies and related crimes," a new release from the FBI states.
According to a new release issued by the U.S. Federal Bureau of Investigation, all three worked at one time with financial institutions or financial services companies when they participated in various illegal schemes between 1999 and 2006.
   “The individuals charged today allegedly participated in complex fraud schemes and conspiracies to manipulate what was supposed to be a competitive process,” Christine Varney, Assistant Attorney General for the Antitrust Divison of the U.S. Department of Justice, said. “The Antitrust Division has previously indicted several individuals and their employer in this matter. Our investigation is ongoing and we will continue to prosecute those who engage in such illegal and anticompetitive behavior.”
   Court documents charge that Beverly Hills, California-based Rubin/Chambers, Dunhill Insurance Services Inc. (known as CDR Financial Products) was one of the co-conspirators and had given Grimm, Goldberg and Carollo information about competing bids, as well as participated in a kickback scheme.
   “The elaborate schemes outlined in the indictment boil down to efforts by these defendants to subvert the competitive bidding process for investment agreements. In the process, they defrauded public entities—and therefore, the public—and put bondholders at risk,” FBI Acting Assistant Director-in-Charge George Venizelos said in a statement released to the public. “The FBI will continue to work with the Antitrust Division to ensure the integrity of competitive bidding in public finance.”
   A trial is scheduled to start in September, 2011.
   In a Task Force Fair Lending Forum held in Chicago this past April, Illinois Attorney General Lisa Madigan had strong words for lenders who manipulate the process for gain.
   “During the peak of the housing bubble, Chicago’s African American and Latino neighborhoods became ground zero for the worst of the mortgage industry’s toxic loans.” Madigan said. “Unfortunately, many families in these communities continue to struggle today because of the lending industry’s illegal, reckless practices. Today’s forum is critical because it enables us to combine state and federal resources and create partnerships with agencies on the ground that are committed to ending the types of discriminatory lending practices that helped cause the worst economic meltdown of our time.”