Brokerage founder avoids jail in muni bond bid-rigging case

Reuters

By Nate Raymond

NEW YORK, March 12 (Reuters) - The head of a California financial products brokerage who pleaded guilty to overseeing a vast enterprise of bid-rigging for investment contracts for municipal bond proceeds avoided prison Wednesday after cooperating with authorities.

David Rubin, founder of CDR Financial Products Inc, pleaded guilty in December 2011 to wire fraud and conspiracy charges stemming from the scheme involving more than 200 investment contracts.

U.S. District Judge Kimba Wood in Manhattan sentenced Rubin and also ordered him to pay up to $5.65 million. The judge chose not to order a prison term, citing Rubin's cooperation and his need to care for his wife while she undergoes chemotherapy.

"He is a significant cooperator who deserves leniency no matter what," Wood said.

The financial penalty includes $2 million in fines and up to $2.15 million in restitution. Rubin will also guarantee a $2 million fine levied against his defunct firm, which was based in Beverly Hills, California.

Rubin, 52, was central in a wide-ranging probe of the $3.7 trillion U.S. municipal bond market. He admitted to taking part in a conspiracy in which CDR and its executives took kickbacks from investment managers in exchange for contracts to manage funds from municipal debt sales. The scheme lasted from 1998 through 2006, prosecutors say.

"I have deep remorse and great regret for my actions," Rubin said at Wednesday's hearing.

Rubin, who began cooperating with the government after his plea, testified at the 2012 trial of three former UBS AG bankers, including Peter Ghavami, who prosecutors said had a "corrupt relationship" with the CDR founder.

Ghavami and the two other UBS bankers, Gary Heinz and Michael Welty, were found guilty at trial and sentenced in July to prison terms ranging from 16 to 27 months.

UBS meanwhile became one of five large financial institutions that agreed to pay about $743 million in restitution, disgorgement and penalties as a result of the probe.

The other companies were Bank of America Corp, JPMorgan Chase & Co, General Electric Co and Wells Fargo & Co.

As a result of the probe, 17 individuals have been convicted, including most recently a former Bank of America Corp executive, Phillip Murphy, who pleaded guilty last month ahead on the eve of trial.

Seven of those convictions included employees at CDR. Three besides Rubin have already been sentenced. Zevi Wolmark, CDR's former chief financial officer, landed the longest prison term of the three at 18 months.

The Justice Department had also secured three other convictions in 2012 following guilty verdicts in the case of three former bankers at General Electric's GE Capital unit, Steven Goldberg, Dominick Carollo and Peter Grimm.

But a federal appeals court vacated their convictions last year, and they were released from prison on Nov. 27.

The case is U.S. v. Rubin/Chambers, Dunhill Insurance Services, Inc, U.S. District Court, Southern District of New York, No. 09-cr-01058.

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