Saturday, April 30th, 2016

Prosecutors Seek 19-1/2 Year Prison Term for One Banker;  Defense Lawyer Outraged.

[ by Howard Haykin ]

U.S. prosecutors are asking for record prison terms for three former UBS AG bankers convicted of conspiring to deceive U.S. municipalities by scheming to rig bids to invest municipal bond proceeds.  The requests, submitted in a Wednesday night filing in Manhattan federal court, reflect the government's aggressive approach toward rooting out fraud in municipal bonds.

Specifically, the government requested the following proposed sentences:

  • At least 19-1/2 years in prison for Gary Heinz, whom the Feds say deserves the biggest punishment.
  • At least 17-1/2 years for Peter Ghavami, former global head of commodities 
  • At least 11-1/4 years for Michael Welty

At least 19 people, some employed by the world's biggest banks, have been convicted or pleaded guilty in the government's probe of the $3.7 trillion U.S. municipal bond market.  The cases all focus on the rigging of returns paid on the short-term investment made with bond proceeds.  Yet, no defendant has yet received a prison sentence longer than four years, according to U.S. Department of Justice records.

Marc Mukasey, representing Heinz, had this to say about the government's requests:  "That is an outrageous request. This is a fraud case, not a serial murder."

Charles Stillman, representing Ghavami, said:  "We're disappointed in the tone of the government's memo, but we'll do our talking in court."

U.S. prosecutors, however, justify their requests, saying the defendants "embraced a culture of corruption" through activities designed to boost profit on their UBS desk, and consequently their own. "Simply put, defendants' crimes were the product of greed and arrogance."

Sentence hearings are scheduled for  5/22 and 5/23 to be held in the courtroom of U.S. District Judge Kimba Wood.

Defendants Denied Wrongdoing.    Ghavami, Heinz and Welty were convicted by a federal jury last August on charges of conspiring to defraud municipal bond issuers.  Ghavami and Heinz also were convicted of wire fraud. 

According to prosecutors, the fraud conspiracies were conducted from March 2001 to November 2006 – in 2001 and 2002, bids were rigged for guaranteed investment contracts that municipalities use to park bond sale proceeds.  The government said such activity deprived municipalities of competitive interest rates for investing bond proceeds intended to refinance debt and for various public works projects, and cost the U.S. Treasury millions of dollars, the government said.  The defendants unsuccessfully denied wrongdoing and accused government witnesses of lying.

Prior Sentencing.   In October, former G.E. executive Steven Goldberg was sentenced to 4 years after he was found guilty of conspiring to rig bids.  He was sentenced by U.S. District Judge Harold Baer.   Co-defendants Dominick Carollo and Peter Grimm, who also worked at GE, each received 3 years in prison.  Prosecutors had sought double-digit sentences for all three defendants.

The case is U.S. v. Ghavami et al, U.S. District Court, Southern District of New York, No. 10-cr-01217.

For further details, go to:   [ Reuters, 5/9/13 ].

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