BofA will pay $137 million to settle claims it defrauded schools, hospitals

By David Edwards
Wednesday, December 8, 2010 14:40 EDT
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Attorneys general from 20 states reached an agreement that will require Bank of America to pay $137.3 million for its part in a bid-rigging scheme, according to the Securities and Exchange Commission (SEC).

The financial institution is accused of defrauding state agencies, municipalities, schools districts, hospitals and other non-profit organizations by rigging bids on municipal bond contracts.

According to a notice on its website, the company will pay restitution of $107.8 million to the counterparties affected by the practice and another $25 million to the Internal Revenue Service (IRS). An additional $4.5 million in legal costs will be paid to state attorneys.

The federal government showed leniency after Bank of America self-reported its potential wrongdoing.

“As previously disclosed, Bank of America was granted amnesty in 2007 by the Department of Justice for self-reporting evidence of possible wrongdoing before the industrywide investigation of these practices began and for continuing to cooperate with the Justice Department’s investigation,” a statement on Bank of America’s website said.

“We are pleased that Bank of America came forward to take responsibility for its conduct and to pay restitution to those harmed by this fraud,” Massachusetts Attorney General Martha Coakley told the Boston Herald.

“Our office will continue to pursue others who were involved in the scheme to defraud cities, towns, schools and non-profits in Massachusetts. Today’s settlement and our ongoing investigations are particularly important given the financial constraints that many state entities, municipalities and non-profits are facing in these tough economic times,” she said.

“Bank of America’s disclosure of wrongdoing and cooperation has led to an aggressive, ongoing investigation by the Department of Justice into anticompetitive activity in the municipal bond derivatives industry,” Justice Department antitrust chief Christine Varney said.

“The Division’s investigation of this matter continues, and the prosecution of anticompetitive conduct in the financial markets remains our highest priority,” she added.

More than a dozen other firms including JPMorgan Chase & Co., UBS AG, and Societe Generale were also noted as unindicted co-conspirators.

The $137.3 million paid by Bank of America is “likely the tip of the iceberg,” Andrew Gavil, a law professor at Howard University, told Bloomberg.

“Stay tuned to this channel — I think you will see a lot more activity in the coming weeks and months,” DOJ’s Varney told reporters. “We are committed to getting restitution, full restitution, to all the municipalities that were victims of this scheme.”

WikiLeaks is expected to disclose a trove of secret information about Bank of America sometime early next year which the site’s founder said would reveal “an ecosystem of corruption.”

David Edwards
David Edwards
David Edwards has served as an editor at Raw Story since 2006. His work can also be found at Crooks & Liars, and he's also been published at The BRAD BLOG. He came to Raw Story after working as a network manager for the state of North Carolina and as as engineer developing enterprise resource planning software. Follow him on Twitter at @DavidEdwards.
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