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FORMER FINANCIAL SERVICES EXECUTIVE INDICTED FOR HIS
PARTICIPATION IN A FAR-REACHING CONSPIRACY AND SCHEME TO
DEFRAUD INVOLVING INVESTMENT CONTRACTS FOR THE PROCEEDS OF
MUNICIPAL BONDS

WASHINGTON — A former financial services executive was indicted yesterday for his participation in a far-reaching conspiracy and scheme to defraud related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.

The three-count indictment was filed yesterday in the U.S. District Court in Charlotte, N.C. The indictment charges Phillip D. Murphy, a former executive for a financial institution, with participating in a wire fraud scheme and separate fraud conspiracies from as early as 1998 until 2006.

The charged conspiracies and scheme to defraud relate to the provision of a type of contract, known as an investment agreement, to public entities, such as state, county and local governments and agencies throughout the United States. Major financial institutions, including banks, investment banks, insurance companies and financial services companies, are among the providers of investment agreements and other related municipal finance contracts. Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issue to raise money for, among other things, public projects. Public entities typically hire a broker to conduct a competitive bidding process among various providers for the award of an investment agreement to invest such money. Competitive bidding for these agreements is the subject of regulations issued by the U.S. Department of the Treasury and is related to the tax-exempt status of the bonds. The company that employed Murphy marketed financial products and services, including services as a provider of investment agreements.

“The individual charged yesterday allegedly participated in a complex fraud scheme and conspiracies to manipulate what was supposed to be a competitive process,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s Criminal Enforcement Program. “The division recently convicted at trial several individuals in this investigation, which is ongoing. We will continue to prosecute those who engage in such illegal and anticompetitive behavior.”

The indictment charges that Murphy conspired with Rubin/Chambers, Dunhill Insurance Services Inc., also known as CDR Financial Products (CDR), a broker of municipal finance contracts, and others to increase the number and profitability of investment agreements and other municipal finance contracts awarded to the provider company where Murphy was employed. Murphy won investment agreements through CDR’s manipulation of the bidding process in obtaining losing bids from other providers, which is explicitly prohibited by U.S. Treasury regulations. As a result of the information, various providers won investment agreements and other municipal finance contracts at artificially determined prices. In exchange for this information, Murphy submitted intentionally losing bids for certain investment agreements and other contracts when requested, and, on occasion, agreed to pay or arranged for kickbacks to be paid to CDR and other co-conspirator brokers.

The indictment also alleges that Murphy and co-conspirators misrepresented to municipal issuers or bond counsel that the bidding process was in compliance with U.S. Treasury regulations. This caused the municipal issuers to award investment agreements and other municipal finance contracts to providers that otherwise would not have been awarded the contracts if the issuers had true and accurate information regarding the bidding process. Such conduct placed the tax-exempt status of the underlying bonds in jeopardy.

According to court documents, the efforts by Murphy and his co-conspirators to control and manipulate the bidding for investment contracts, and the execution of a variety of certifications that covered up their scheme, also obstructed the Internal Revenue Service (IRS)’s ability to monitor compliance with U.S. Treasury regulations and impeded the IRS’s ability to determine whether municipal issuers had correctly accounted for any money that was owed to the U.S. Treasury.

In a separate count, the indictment charges that Murphy conspired with others to falsify bank records related to marketing profits so that the co-conspirators could pay the kickbacks to CDR and others.

“Yesterday’s charges outline a fraudulent scheme to subvert competition in the marketplace. Those who engage in this type of criminal activity not only stand to defraud public entities, but erode the public’s trust in the competitive bidding process,” said Janice K. Fedarcyk, Assistant Director in Charge of the FBI in New York. “The FBI will continue to work with the Antitrust Division to ensure the integrity of competitive bidding in public finance.”

“This case demonstrates the value of a coordinated approach by multiple agencies and law enforcement authorities,” said Internal Revenue Service-Criminal Investigation (IRS-CI) Chief Richard Weber. “IRS Criminal Investigation contributed to this joint effort by providing financial investigative expertise to uncover this complex and sophisticated scheme. Professionals, including financial service executives, should know we will devote all resources necessary to bring to justice those who commit financial crimes.”

Murphy is charged with two counts of conspiracy and one count of wire fraud. The fraud conspiracy with which Murphy is charged carries a maximum penalty of five years in prison and a $250,000 fine. The wire fraud charge carries a maximum penalty of 30 years in prison and a $1 million fine. The false bank records conspiracy carries a maximum penalty of five years in prison and a $250,000 fine. The maximum fines for each of these offenses may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

The charges announced today resulted from an ongoing investigation conducted by the Antitrust Division’s New York and Cleveland Field Offices, the FBI and IRS-CI. The division is coordinating its investigation 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, a total of 13 individuals and one company have pleaded guilty to charges stemming from the ongoing investigation. In May 2012, a federal jury in the Southern District of New York convicted Dominick Carollo, Steven Goldberg and Peter Grimm of multiple counts involving similar fraud conspiracies after a four-week trial. Three other former executives of a financial institution were indicted on Dec. 9, 2010, for participating in fraud schemes and conspiracies related to the bidding for investment agreements, and are awaiting trial, which is scheduled to begin in Manhattan on July 30, 2012.

Yesterday’s indictment is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

Anyone with information concerning bid rigging and related offenses in any financial markets should contact the Antitrust Division’s New York Field Office at 212-335-8000, the FBI at 212-384-5000 or IRS-CI at 212-436-1761, or visit www.justice.gov/atr/contact/newcase.htm.

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FORMER NEW YORK EMPLOYEE OF A FINANCIAL INSTITUTION PLEADS
GUILTY FOR HIS ROLE IN FRAUD CONSPIRACY INVOLVING
MUNICIPAL BONDS

WASHINGTON — A former financial institution employee pleaded guilty today for his participation in a conspiracy related to municipal bonds, the Department of Justice announced.

According to the plea proceeding held today in the U.S. District Court in Manhattan, Alexander Wright, a resident of New York City, engaged in a fraud conspiracy in the municipal finance industry. According to court documents, the New York-based financial institution that employed Wright as a vice president of the municipal derivatives marketing group was a provider of investment agreements as well as other municipal finance contracts to public entities. Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issue, to raise money for, among other things, public projects. Public entities typically hire a broker to conduct a competitive bidding process for the award of the investment agreements and often for other municipal finance contracts.

The department said in court documents that from approximately June 12, 2002, until approximately June 20, 2002, Wright participated in a fraud conspiracy with former executives from another financial institution, among others. One of the co-conspirators acted as the broker for a municipal finance contract, which was to be competitively bid. The co-conspirator gave Wright information about the prices or price levels of competitors’ bids, a practice known as a “last look.” The co-conspirator signaled Wright to change his bid to a specific number so that Wright’s employer could make more money. Wright and his co-conspirators represented to the municipal issuer that the bidding process was competitive when, in fact, it was not. The department said that, as a result of the bid manipulation, Wright’s employer won the contract at an artificially inflated price, which, since the issuer paid a higher price for the contract, deprived the municipal issuer of money and property.

“By engaging in non-competitive practices, such as sharing confidential bidding information, the co-conspirators undermined the integrity of the municipal bond market and deprived the bond issuer of a fair and competitive price,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s Criminal Enforcement Program. “Today’s guilty plea demonstrates our continued efforts to hold accountable those who subvert the competitive process in our financial markets.”

The conspiracy to commit wire fraud for which Wright is charged carries a maximum penalty of five years in prison and a $250,000 criminal fine. The maximum fine for this offense may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

“The type of bid-rigging scheme Wright and his co-conspirators participated in not only deprives the municipal issuer of a fair and just bidding process, but weakens the public’s trust in the municipal bond market,” said Janice K. Fedarcyk, Assistant Director in Charge of the FBI in New York. “Today’s guilty plea is proof of our continued determination to root out those whose business practices contribute to the deterioration of healthy competition in the financial markets.”

“This guilty plea is another step in our efforts to clean up the fraudulent practices in the municipal bond market,” said Internal Revenue Service-Criminal Investigation (IRS-CI) Chief Richard Weber. “IRS Criminal Investigation will continue to provide financial investigative assistance to ensure individuals are held accountable for their criminal behavior.”

The charges announced today resulted from an ongoing investigation conducted by the Antitrust Division’s New York and Chicago Field Offices, the FBI and IRS-CI. The division is coordinating its investigation 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, 12 individuals and one company have pleaded guilty to charges stemming from the ongoing investigation. In May 2012, a federal jury in the Southern District of New York convicted Dominick Carollo, Steven Goldberg and Peter Grimm of multiple counts involving similar fraud conspiracies after a four-week trial. Three other former executives of a financial institution were indicted on Dec. 9, 2010, for participating in fraud schemes and conspiracies related to the bidding for investment agreements, and are awaiting trial, which is scheduled to begin in Manhattan on July 30, 2012.

Today’s guilty plea is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

Anyone with information concerning bid rigging and related offenses in any financial markets should contact the Antitrust Division’s New York Field Office at 212-335-8000, the FBI at 212-384-5000 or IRS-CI at 212-436-1761, or visit www.justice.gov/atr/contact/newcase.htm.

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OWNER OF INSULATION SERVICE COMPANY PLEADS GUILTY TO MILLION
DOLLAR BID-RIGGING AND FRAUD CONSPIRACIES AT
NEW YORK CITY HOSPITAL

WASHINGTON — The owner of a former New York City insulation service company pleaded guilty today to a three-count indictment charging him with conspiring to rig bids on contracts for re-insulation services to New York Presbyterian Hospital (NYPH), conspiring to defraud the Internal Revenue Service (IRS) and filing a false tax return, the Department of Justice announced.

David Porath pleaded guilty in the U.S. District Court in Manhattan to charges originally filed under seal on Feb. 18, 2010. At the time of the indictment, Porath was living in Israel. He was extradited and returned to the United States on Feb. 16, 2012. According to the indictment, between early 2000 and March 2005, Porath and his co-conspirators engaged in a bid-rigging conspiracy whereby they created the illusion of a competitive bidding process at NYPH by preparing and submitting fictitious, intentionally high bids so that Porath’s company would be awarded the contracts for re-insulation services for having the “low” bid.

“By submitting intentionally high, non-competitive bids, the co-conspirators deceived NYPH and distorted the competitive market,” said Acting Assistant Attorney General Joseph Wayland in charge of the Department of Justice’s Antitrust Division. “The division will continue to apprehend and bring to justice those who rig bids and thereby deprive the public of the benefits afforded by a truly competitive bidding process.”

The indictment further charged that between October 2000 and February 2005, Porath conspired with Andrzej Gosek, the owner of a Pennsylvania-based asbestos abatement company, and others, to defraud the IRS and to subscribe to false tax returns. Porath gave Gosek checks made out to companies in Brooklyn, purportedly for work done at NYPH by the Brooklyn companies as sub-contractors to Porath’s company. However, the companies had not performed the work. The checks totaled approximately $229,100 in 2000; $1.19 million in 2001; $760,000 in 2002; $50,000 in 2003; and $125,000 in 2004.

The Brooklyn companies cashed the checks and Gosek delivered the cash, less approximately five percent, back to Porath. Based upon these checks to the Brooklyn companies, Porath took false deductions on his company’s and his personal federal tax returns, allowing Porath to fraudulently reduce his taxable income. The indictment also charged Porath with filing a false federal tax return on or about Feb. 17, 2005, which substantially understated his income.

The bid-rigging charge carries a maximum penalty of 10 years in prison and a $1 million fine. The tax fraud conspiracy charge carries a maximum penalty of five years in prison and a $250,000 fine. The false subscription charge carries a maximum penalty of three years in prison and a $100,000 fine. The maximum fine for each of these charges may be increased to twice the gain derived from the crimes or twice the loss suffered by the victims of the crimes, if either of those amounts is greater than the statutory maximum fine.

Including Porath and Gosek, who pleaded guilty in November 2010, 15 individuals and six companies have been convicted of or pleaded guilty to charges arising out of this federal antitrust investigation of bid rigging, fraud, bribery and tax-related offenses relating to the award of contracts by the facilities operations department of NYPH.

The investigation was conducted by the Antitrust Division’s New York Field Office with the assistance of the FBI and the Internal Revenue Service – Criminal Investigation’s New York Field Office. The Office of International Affairs in the Justice Department’s Criminal Division also provided assistance. Anyone with information concerning bid rigging, bribery, tax offenses or fraud related at NYPH should contact the Antitrust Division’s New York Field Office of the at 212-335-8000, visit www.justice.gov/atr/contact/newcase.htm, or call the FBI’s New York Division at 212-384-1000.

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TWO INDIVIDUALS SENTENCED TO PRISON FOR PARTICIPATING IN
KICKBACK SCHEME AT NEW YORK PRESBYTERIAN HOSPITAL

A Pennsylvania Company and Two New York Companies Sentenced to Pay a Total of $3 Million in Criminal Fines

WASHINGTON — Two individuals and three corporations were sentenced in the U.S. District Court in Manhattan by Judge George B. Daniels today to serve time in prison and to pay criminal fines for their participation in an eight-year conspiracy involving kickbacks in excess of $2.3 million to defraud New York Presbyterian Hospital (NYPH), the Department of Justice announced. The individuals and the corporations were convicted after a four-week trial in February 2012.

Michael Yaron, the owner of two of the companies convicted for their roles in the conspiracy—Cambridge Environmental & Construction Corp, doing business as National Environmental Associates (Cambridge/NEA) and Oxford Construction & Development Corp.—was sentenced to serve 60 months in jail, and to pay a $500,000 criminal fine. Cambridge/NEA and Oxford Construction were each sentenced to pay a $1 million criminal fine.

Moshe Buchnik, the president of an asbestos abatement company that also did business at NYPH, was sentenced to serve 48 months in jail, and to pay a $500,000 criminal fine for his role in the conspiracy.

Artech Corp., a company owned by a relative of Santo Saglimbeni, a former vice president of facilities operations at NYPH, was also sentenced to pay a $1 million criminal fine.

Two additional charged co-conspirators, Saglimbeni and Emilio “Tony” Figueroa, a former director of facilities operations at NYPH, who were convicted along with Yaron, Buchnick, Cambridge/NEA, Oxford Construction and Artech, are scheduled to appear in court on July 31, 2012.

“The sentences imposed today are consistent with the seriousness of the crimes for which the individuals and companies were found guilty,” said Acting Assistant Attorney General Joseph Wayland in charge of the Department of Justice’s Antitrust Division. “Today’s sentences hold accountable the unlawful conduct of those involved in illegal kickback conspiracies.”

The department said the scheme to defraud NYPH centered on Saglimbeni, who with the assistance of Figueroa, awarded asbestos abatement, air monitoring and general construction contracts to Yaron, Buchnik and their companies in return for more than $2.3 million in kickbacks. The kickbacks were funneled by Yaron to Saglimbeni through Artech Corp., a sham company Saglimbeni created in his mother’s name in order to conceal the kickbacks.

Yaron, Buchnik, Saglimbeni, Figueroa, Cambridge/ NEA, Oxford Construction and Artech, were each convicted of conspiracy to defraud NYPH. Additionally, Yaron, his companies, Buchnik, Saglimbeni and Artech were also convicted of a substantive wire fraud violation.

The sentences announced today resulted from a federal antitrust investigation of bid rigging, fraud, bribery and tax-related offenses in the award of construction, maintenance and service contracts to the facilities operations department of NYPH. Including today’s sentencings, 14 individuals and six companies have been convicted of or pleaded guilty to charges arising out of this investigation.

The investigation was conducted by the Antitrust Division’s New York Field Office with the assistance of the FBI and the Internal Revenue Service – Criminal Investigation’s New York Field Office. Anyone with information concerning bid rigging, bribery, tax offenses, or fraud at NYPH should contact the Antitrust Division’s New York Field Office of the at 212-335-8000, visit www.justice.gov/atr/contact/newcase.htm, or the FBI’s New York Division at 212-384-1000.

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THREE FORMER FINANCIAL SERVICES EXECUTIVES CONVICTED FOR ROLES
IN CONSPIRACIES INVOLVING INVESTMENT CONTRACTS FOR THE PROCEEDS
OF MUNICIPAL BONDS

WASHINGTON — A federal jury in New York City today convicted three former financial services executives for their participation in conspiracies related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.

Dominick P. Carollo, Steven E. Goldberg and Peter S. Grimm, all former executives of General Electric Co. (GE) affiliates, were found guilty on all remaining counts of a superseding indictment in the U.S. District Court for the Southern District of New York. Carollo was found guilty on two counts of conspiracy to commit wire fraud and defraud the United States, Goldberg was found guilty on four counts of conspiracy to commit wire fraud and defraud the United States and Grimm was found guilty on three counts of conspiracy to commit wire fraud and to defraud the United States.

The trial began on April 16, 2012. Carollo, Goldberg and Grimm were initially indicted on July 27, 2010.

“The defendants corrupted the competitive bidding process and defrauded municipalities across the country for years,” said Deputy Assistant Attorney General Scott D. Hammond of the Antitrust Division. “Through corruption and fraud, they cheated cities and towns out of money for important public works projects. Today’s convictions reflect our determination to preserve fairness and competition in the financial services market. ”

According to evidence presented at trial, while employed at GE affiliates, Carollo, Goldberg and Grimm participated in separate fraud conspiracies with various financial institutions and insurance companies and their representatives at various time periods from as early as 1999 until 2006. These institutions and companies, or “providers,” offered a type of contract, known as an investment agreement, to state, county and local governments and agencies throughout the United States. The public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects. Goldberg also participated in the conspiracies while employed at Financial Security Assurance Capital Management Services LLC (FSA).

According to evidence presented at trial, Carollo, Goldberg and Grimm and their co-conspirators corrupted the bidding process for dozens of investment agreements to increase the number and profitability of investment agreements awarded to the provider companies where they were employed. Carollo, Goldberg and Grimm deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities for various public works projects, such as for building or repairing schools, hospitals and roads. Evidence at trial established that they cost municipalities around the country millions of dollars.

“Fundamentally, this case is about fraud in the investment of public money,” said Janice K. Fedarcyk, Assistant Director in Charge of the FBI in New York. “The actions of the defendants denied public entities the benefits of true competitive bidding, and artificially depressed the yield on invested public funds. ”

“Today’s convictions are an important step forward in the coordinated effort by the IRS and the Department of Justice to aggressively rid the municipal bond industry of unfair and corrupt practices,” said Internal Revenue Service (IRS)-Criminal Investigation (IRS-CI) Special Agent in Charge Victor W. Lessoff. “Moreover, the convictions represent an important victory for America’s taxpayers, especially those who live in the municipalities harmed by the actions of the defendants. ”

A total of eighteen individuals have been charged as a result of the department’s ongoing municipal bonds investigation. Including today’s convictions, a total of 15 individuals have been convicted and three await trial. Additionally, one company has pleaded guilty.

Each of the fraud conspiracy charges carries a maximum penalty per count of five years in prison and a $250,000 fine. The maximum fines for the fraud conspiracy offense may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

The verdict announced today resulted from an ongoing investigation conducted by the Antitrust Division’s New York Office, the FBI and the IRS-CI. The division is coordinating its investigation with the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.

Today’s convictions are part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force, visit www.StopFraud.gov.

Anyone with information concerning bid rigging and related offenses in any financial markets should contact the Antitrust Division’s New York Field Office at 212-335-8000, the FBI at 212-384-5000 or IRS-CI at 212-436-1761, or visit www.justice.gov/atr/contact/newcase.htm.

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NEW JERSEY FINANCIAL INVESTOR AND HIS COMPANY PLEAD GUILTY TO
BID RIGGING AT MUNICIPAL TAX LIEN AUCTIONS

WASHINGTON — A financial investor who purchased municipal tax liens at auctions in New Jersey, as well as a company in which he was a partner, pleaded guilty today for their roles in a conspiracy to rig bids for the sale of tax liens auctioned by municipalities throughout the state, the Department of Justice announced.

A felony charge was filed today in the U.S. District Court for the District of New Jersey in Newark, N.J., against David Butler of Cherry Hill, N.J. A charge was also filed against DSBD LLC, a New Jersey company responsible for managing tax lien investments in which Butler had a partnership interest. Under the plea agreements, which are subject to court approval, Butler and DSBD have each agreed to cooperate with the department’s ongoing investigation.

According to the felony charges, from at least as early as the beginning of 2005 until approximately February 2009, Butler and his company participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey by agreeing to allocate among certain bidders on which liens to bid. The department said that both Butler and DSBD proceeded to submit bids in accordance with their agreements and purchased tax liens at collusive and non-competitive interest rates.

“The Antitrust Division is committed to holding accountable those who seek to exploit and undermine the competitive process at municipal tax lien auctions,” said Acting Assistant Attorney General Sharis A. Pozen in charge of the Department of Justice’s Antitrust Division. “The division will continue to work with its law enforcement partners to prosecute those who harm our local communities by engaging in this kind of anticompetitive conduct in municipal tax lien auctions.”

The department said that the primary purpose of the conspiracy was to suppress and restrain competition to obtain selected municipal tax liens offered at public auctions at non-competitive interest rates. When the owner of real property fails to pay taxes on that property, the municipality in which the property is located may attach a lien for the amount of the unpaid taxes. If the taxes remain unpaid after a waiting period, the lien may be sold at auction. State law requires that investors bid on the interest rate delinquent homeowners will pay upon redemption. By law, the bid opens at 18 percent interest and, through a competitive bidding process, can be driven down to zero percent. If a lien remains unpaid after a certain period of time, the investor who purchased the lien may begin foreclosure proceedings against the property to which the lien is attached.

According to the court documents, Butler and DSBD conspired with others not to bid against one another at municipal tax lien auctions in New Jersey. Since the conspiracy permitted the conspirators to purchase tax liens with limited competition, each conspirator was able to obtain liens which earned a higher interest rate. Property owners were therefore made to pay higher interest on their tax debts than they would have paid had their liens been purchased in open and honest competition.

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum penalty for a corporation is a $100 million criminal fine. The maximum fine for a Sherman Act violation may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the statutory maximum.

Today’s guilty pleas are the eighth and ninth pleas resulting from an ongoing investigation into bid rigging or fraud related to municipal tax lien auctions. On Aug. 24, 2011, Isadore H. May, Richard J. Pisciotta Jr. and William A. Collins each pleaded guilty to one count of bid rigging in connection with their participation in a conspiracy to allocate liens at New Jersey auctions. On Feb. 23, 2012, Robert W. Stein and David M. Farber also pleaded guilty to conspiring to allocate liens at municipal tax lien auctions in New Jersey. On March 27, 2012, Robert E. Rothman pleaded guilty for his role in a conspiracy to rig bids for the sales of tax liens auctioned by municipalities throughout New Jersey. On April 17, 2012, Stephen E. Hruby also pleaded guilty for his role in a conspiracy to rig bids for the sale of tax liens auctioned by municipalities throughout New Jersey.

Today’s charges are part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF). President Obama established the interagency FFETF to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov.

The ongoing investigation is being conducted by the Antitrust Division’s New York Field Office and the FBI’s Atlantic City, N.J., office. Anyone with information concerning bid rigging or fraud related to municipal tax lien auctions should contact the Antitrust Division’s New York Field Office at 212-335-8000, visit www.justice.gov/atr/contact/newcase.htm or contact the FBI’s Atlantic City Resident Agency at 609-677-6400.

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FORMER FINANCIAL SERVICES EXECUTIVE INDICTED FOR HIS
PARTICIPATION IN A FAR-REACHING CONSPIRACY AND SCHEME TO
DEFRAUD INVOLVING INVESTMENT CONTRACTS FOR THE PROCEEDS OF
MUNICIPAL BONDS

WASHINGTON — A former financial services executive was indicted yesterday for his participation in a far-reaching conspiracy and scheme to defraud related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.

The three-count indictment was filed yesterday in the U.S. District Court in Charlotte, N.C. The indictment charges Phillip D. Murphy, a former executive for a financial institution, with participating in a wire fraud scheme and separate fraud conspiracies from as early as 1998 until 2006.

The charged conspiracies and scheme to defraud relate to the provision of a type of contract, known as an investment agreement, to public entities, such as state, county and local governments and agencies throughout the United States. Major financial institutions, including banks, investment banks, insurance companies and financial services companies, are among the providers of investment agreements and other related municipal finance contracts. Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issue to raise money for, among other things, public projects. Public entities typically hire a broker to conduct a competitive bidding process among various providers for the award of an investment agreement to invest such money. Competitive bidding for these agreements is the subject of regulations issued by the U.S. Department of the Treasury and is related to the tax-exempt status of the bonds. The company that employed Murphy marketed financial products and services, including services as a provider of investment agreements.

“The individual charged yesterday allegedly participated in a complex fraud scheme and conspiracies to manipulate what was supposed to be a competitive process,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s Criminal Enforcement Program. “The division recently convicted at trial several individuals in this investigation, which is ongoing. We will continue to prosecute those who engage in such illegal and anticompetitive behavior.”

The indictment charges that Murphy conspired with Rubin/Chambers, Dunhill Insurance Services Inc., also known as CDR Financial Products (CDR), a broker of municipal finance contracts, and others to increase the number and profitability of investment agreements and other municipal finance contracts awarded to the provider company where Murphy was employed. Murphy won investment agreements through CDR’s manipulation of the bidding process in obtaining losing bids from other providers, which is explicitly prohibited by U.S. Treasury regulations. As a result of the information, various providers won investment agreements and other municipal finance contracts at artificially determined prices. In exchange for this information, Murphy submitted intentionally losing bids for certain investment agreements and other contracts when requested, and, on occasion, agreed to pay or arranged for kickbacks to be paid to CDR and other co-conspirator brokers.

The indictment also alleges that Murphy and co-conspirators misrepresented to municipal issuers or bond counsel that the bidding process was in compliance with U.S. Treasury regulations. This caused the municipal issuers to award investment agreements and other municipal finance contracts to providers that otherwise would not have been awarded the contracts if the issuers had true and accurate information regarding the bidding process. Such conduct placed the tax-exempt status of the underlying bonds in jeopardy.

According to court documents, the efforts by Murphy and his co-conspirators to control and manipulate the bidding for investment contracts, and the execution of a variety of certifications that covered up their scheme, also obstructed the Internal Revenue Service (IRS)’s ability to monitor compliance with U.S. Treasury regulations and impeded the IRS’s ability to determine whether municipal issuers had correctly accounted for any money that was owed to the U.S. Treasury.

In a separate count, the indictment charges that Murphy conspired with others to falsify bank records related to marketing profits so that the co-conspirators could pay the kickbacks to CDR and others.

“Yesterday’s charges outline a fraudulent scheme to subvert competition in the marketplace. Those who engage in this type of criminal activity not only stand to defraud public entities, but erode the public’s trust in the competitive bidding process,” said Janice K. Fedarcyk, Assistant Director in Charge of the FBI in New York. “The FBI will continue to work with the Antitrust Division to ensure the integrity of competitive bidding in public finance.”

“This case demonstrates the value of a coordinated approach by multiple agencies and law enforcement authorities,” said Internal Revenue Service-Criminal Investigation (IRS-CI) Chief Richard Weber. “IRS Criminal Investigation contributed to this joint effort by providing financial investigative expertise to uncover this complex and sophisticated scheme. Professionals, including financial service executives, should know we will devote all resources necessary to bring to justice those who commit financial crimes.”

Murphy is charged with two counts of conspiracy and one count of wire fraud. The fraud conspiracy with which Murphy is charged carries a maximum penalty of five years in prison and a $250,000 fine. The wire fraud charge carries a maximum penalty of 30 years in prison and a $1 million fine. The false bank records conspiracy carries a maximum penalty of five years in prison and a $250,000 fine. The maximum fines for each of these offenses may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

The charges announced today resulted from an ongoing investigation conducted by the Antitrust Division’s New York and Cleveland Field Offices, the FBI and IRS-CI. The division is coordinating its investigation 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, a total of 13 individuals and one company have pleaded guilty to charges stemming from the ongoing investigation. In May 2012, a federal jury in the Southern District of New York convicted Dominick Carollo, Steven Goldberg and Peter Grimm of multiple counts involving similar fraud conspiracies after a four-week trial. Three other former executives of a financial institution were indicted on Dec. 9, 2010, for participating in fraud schemes and conspiracies related to the bidding for investment agreements, and are awaiting trial, which is scheduled to begin in Manhattan on July 30, 2012.

Yesterday’s indictment is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

Anyone with information concerning bid rigging and related offenses in any financial markets should contact the Antitrust Division’s New York Field Office at 212-335-8000, the FBI at 212-384-5000 or IRS-CI at 212-436-1761, or visit www.justice.gov/atr/contact/newcase.htm.

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FORMER NEW YORK EMPLOYEE OF A FINANCIAL INSTITUTION PLEADS
GUILTY FOR HIS ROLE IN FRAUD CONSPIRACY INVOLVING
MUNICIPAL BONDS

WASHINGTON — A former financial institution employee pleaded guilty today for his participation in a conspiracy related to municipal bonds, the Department of Justice announced.

According to the plea proceeding held today in the U.S. District Court in Manhattan, Alexander Wright, a resident of New York City, engaged in a fraud conspiracy in the municipal finance industry. According to court documents, the New York-based financial institution that employed Wright as a vice president of the municipal derivatives marketing group was a provider of investment agreements as well as other municipal finance contracts to public entities. Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issue, to raise money for, among other things, public projects. Public entities typically hire a broker to conduct a competitive bidding process for the award of the investment agreements and often for other municipal finance contracts.

The department said in court documents that from approximately June 12, 2002, until approximately June 20, 2002, Wright participated in a fraud conspiracy with former executives from another financial institution, among others. One of the co-conspirators acted as the broker for a municipal finance contract, which was to be competitively bid. The co-conspirator gave Wright information about the prices or price levels of competitors’ bids, a practice known as a “last look.” The co-conspirator signaled Wright to change his bid to a specific number so that Wright’s employer could make more money. Wright and his co-conspirators represented to the municipal issuer that the bidding process was competitive when, in fact, it was not. The department said that, as a result of the bid manipulation, Wright’s employer won the contract at an artificially inflated price, which, since the issuer paid a higher price for the contract, deprived the municipal issuer of money and property.

“By engaging in non-competitive practices, such as sharing confidential bidding information, the co-conspirators undermined the integrity of the municipal bond market and deprived the bond issuer of a fair and competitive price,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s Criminal Enforcement Program. “Today’s guilty plea demonstrates our continued efforts to hold accountable those who subvert the competitive process in our financial markets.”

The conspiracy to commit wire fraud for which Wright is charged carries a maximum penalty of five years in prison and a $250,000 criminal fine. The maximum fine for this offense may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

“The type of bid-rigging scheme Wright and his co-conspirators participated in not only deprives the municipal issuer of a fair and just bidding process, but weakens the public’s trust in the municipal bond market,” said Janice K. Fedarcyk, Assistant Director in Charge of the FBI in New York. “Today’s guilty plea is proof of our continued determination to root out those whose business practices contribute to the deterioration of healthy competition in the financial markets.”

“This guilty plea is another step in our efforts to clean up the fraudulent practices in the municipal bond market,” said Internal Revenue Service-Criminal Investigation (IRS-CI) Chief Richard Weber. “IRS Criminal Investigation will continue to provide financial investigative assistance to ensure individuals are held accountable for their criminal behavior.”

The charges announced today resulted from an ongoing investigation conducted by the Antitrust Division’s New York and Chicago Field Offices, the FBI and IRS-CI. The division is coordinating its investigation 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, 12 individuals and one company have pleaded guilty to charges stemming from the ongoing investigation. In May 2012, a federal jury in the Southern District of New York convicted Dominick Carollo, Steven Goldberg and Peter Grimm of multiple counts involving similar fraud conspiracies after a four-week trial. Three other former executives of a financial institution were indicted on Dec. 9, 2010, for participating in fraud schemes and conspiracies related to the bidding for investment agreements, and are awaiting trial, which is scheduled to begin in Manhattan on July 30, 2012.

Today’s guilty plea is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

Anyone with information concerning bid rigging and related offenses in any financial markets should contact the Antitrust Division’s New York Field Office at 212-335-8000, the FBI at 212-384-5000 or IRS-CI at 212-436-1761, or visit www.justice.gov/atr/contact/newcase.htm.

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OWNER OF INSULATION SERVICE COMPANY PLEADS GUILTY TO MILLION
DOLLAR BID-RIGGING AND FRAUD CONSPIRACIES AT
NEW YORK CITY HOSPITAL

WASHINGTON — The owner of a former New York City insulation service company pleaded guilty today to a three-count indictment charging him with conspiring to rig bids on contracts for re-insulation services to New York Presbyterian Hospital (NYPH), conspiring to defraud the Internal Revenue Service (IRS) and filing a false tax return, the Department of Justice announced.

David Porath pleaded guilty in the U.S. District Court in Manhattan to charges originally filed under seal on Feb. 18, 2010. At the time of the indictment, Porath was living in Israel. He was extradited and returned to the United States on Feb. 16, 2012. According to the indictment, between early 2000 and March 2005, Porath and his co-conspirators engaged in a bid-rigging conspiracy whereby they created the illusion of a competitive bidding process at NYPH by preparing and submitting fictitious, intentionally high bids so that Porath’s company would be awarded the contracts for re-insulation services for having the “low” bid.

“By submitting intentionally high, non-competitive bids, the co-conspirators deceived NYPH and distorted the competitive market,” said Acting Assistant Attorney General Joseph Wayland in charge of the Department of Justice’s Antitrust Division. “The division will continue to apprehend and bring to justice those who rig bids and thereby deprive the public of the benefits afforded by a truly competitive bidding process.”

The indictment further charged that between October 2000 and February 2005, Porath conspired with Andrzej Gosek, the owner of a Pennsylvania-based asbestos abatement company, and others, to defraud the IRS and to subscribe to false tax returns. Porath gave Gosek checks made out to companies in Brooklyn, purportedly for work done at NYPH by the Brooklyn companies as sub-contractors to Porath’s company. However, the companies had not performed the work. The checks totaled approximately $229,100 in 2000; $1.19 million in 2001; $760,000 in 2002; $50,000 in 2003; and $125,000 in 2004.

The Brooklyn companies cashed the checks and Gosek delivered the cash, less approximately five percent, back to Porath. Based upon these checks to the Brooklyn companies, Porath took false deductions on his company’s and his personal federal tax returns, allowing Porath to fraudulently reduce his taxable income. The indictment also charged Porath with filing a false federal tax return on or about Feb. 17, 2005, which substantially understated his income.

The bid-rigging charge carries a maximum penalty of 10 years in prison and a $1 million fine. The tax fraud conspiracy charge carries a maximum penalty of five years in prison and a $250,000 fine. The false subscription charge carries a maximum penalty of three years in prison and a $100,000 fine. The maximum fine for each of these charges may be increased to twice the gain derived from the crimes or twice the loss suffered by the victims of the crimes, if either of those amounts is greater than the statutory maximum fine.

Including Porath and Gosek, who pleaded guilty in November 2010, 15 individuals and six companies have been convicted of or pleaded guilty to charges arising out of this federal antitrust investigation of bid rigging, fraud, bribery and tax-related offenses relating to the award of contracts by the facilities operations department of NYPH.

The investigation was conducted by the Antitrust Division’s New York Field Office with the assistance of the FBI and the Internal Revenue Service – Criminal Investigation’s New York Field Office. The Office of International Affairs in the Justice Department’s Criminal Division also provided assistance. Anyone with information concerning bid rigging, bribery, tax offenses or fraud related at NYPH should contact the Antitrust Division’s New York Field Office of the at 212-335-8000, visit www.justice.gov/atr/contact/newcase.htm, or call the FBI’s New York Division at 212-384-1000.

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TWO INDIVIDUALS SENTENCED TO PRISON FOR PARTICIPATING IN
KICKBACK SCHEME AT NEW YORK PRESBYTERIAN HOSPITAL

A Pennsylvania Company and Two New York Companies Sentenced to Pay a Total of $3 Million in Criminal Fines

WASHINGTON — Two individuals and three corporations were sentenced in the U.S. District Court in Manhattan by Judge George B. Daniels today to serve time in prison and to pay criminal fines for their participation in an eight-year conspiracy involving kickbacks in excess of $2.3 million to defraud New York Presbyterian Hospital (NYPH), the Department of Justice announced. The individuals and the corporations were convicted after a four-week trial in February 2012.

Michael Yaron, the owner of two of the companies convicted for their roles in the conspiracy—Cambridge Environmental & Construction Corp, doing business as National Environmental Associates (Cambridge/NEA) and Oxford Construction & Development Corp.—was sentenced to serve 60 months in jail, and to pay a $500,000 criminal fine. Cambridge/NEA and Oxford Construction were each sentenced to pay a $1 million criminal fine.

Moshe Buchnik, the president of an asbestos abatement company that also did business at NYPH, was sentenced to serve 48 months in jail, and to pay a $500,000 criminal fine for his role in the conspiracy.

Artech Corp., a company owned by a relative of Santo Saglimbeni, a former vice president of facilities operations at NYPH, was also sentenced to pay a $1 million criminal fine.

Two additional charged co-conspirators, Saglimbeni and Emilio “Tony” Figueroa, a former director of facilities operations at NYPH, who were convicted along with Yaron, Buchnick, Cambridge/NEA, Oxford Construction and Artech, are scheduled to appear in court on July 31, 2012.

“The sentences imposed today are consistent with the seriousness of the crimes for which the individuals and companies were found guilty,” said Acting Assistant Attorney General Joseph Wayland in charge of the Department of Justice’s Antitrust Division. “Today’s sentences hold accountable the unlawful conduct of those involved in illegal kickback conspiracies.”

The department said the scheme to defraud NYPH centered on Saglimbeni, who with the assistance of Figueroa, awarded asbestos abatement, air monitoring and general construction contracts to Yaron, Buchnik and their companies in return for more than $2.3 million in kickbacks. The kickbacks were funneled by Yaron to Saglimbeni through Artech Corp., a sham company Saglimbeni created in his mother’s name in order to conceal the kickbacks.

Yaron, Buchnik, Saglimbeni, Figueroa, Cambridge/ NEA, Oxford Construction and Artech, were each convicted of conspiracy to defraud NYPH. Additionally, Yaron, his companies, Buchnik, Saglimbeni and Artech were also convicted of a substantive wire fraud violation.

The sentences announced today resulted from a federal antitrust investigation of bid rigging, fraud, bribery and tax-related offenses in the award of construction, maintenance and service contracts to the facilities operations department of NYPH. Including today’s sentencings, 14 individuals and six companies have been convicted of or pleaded guilty to charges arising out of this investigation.

The investigation was conducted by the Antitrust Division’s New York Field Office with the assistance of the FBI and the Internal Revenue Service – Criminal Investigation’s New York Field Office. Anyone with information concerning bid rigging, bribery, tax offenses, or fraud at NYPH should contact the Antitrust Division’s New York Field Office of the at 212-335-8000, visit www.justice.gov/atr/contact/newcase.htm, or the FBI’s New York Division at 212-384-1000.

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THREE FORMER FINANCIAL SERVICES EXECUTIVES CONVICTED FOR ROLES
IN CONSPIRACIES INVOLVING INVESTMENT CONTRACTS FOR THE PROCEEDS
OF MUNICIPAL BONDS

WASHINGTON — A federal jury in New York City today convicted three former financial services executives for their participation in conspiracies related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.

Dominick P. Carollo, Steven E. Goldberg and Peter S. Grimm, all former executives of General Electric Co. (GE) affiliates, were found guilty on all remaining counts of a superseding indictment in the U.S. District Court for the Southern District of New York. Carollo was found guilty on two counts of conspiracy to commit wire fraud and defraud the United States, Goldberg was found guilty on four counts of conspiracy to commit wire fraud and defraud the United States and Grimm was found guilty on three counts of conspiracy to commit wire fraud and to defraud the United States.

The trial began on April 16, 2012. Carollo, Goldberg and Grimm were initially indicted on July 27, 2010.

“The defendants corrupted the competitive bidding process and defrauded municipalities across the country for years,” said Deputy Assistant Attorney General Scott D. Hammond of the Antitrust Division. “Through corruption and fraud, they cheated cities and towns out of money for important public works projects. Today’s convictions reflect our determination to preserve fairness and competition in the financial services market. ”

According to evidence presented at trial, while employed at GE affiliates, Carollo, Goldberg and Grimm participated in separate fraud conspiracies with various financial institutions and insurance companies and their representatives at various time periods from as early as 1999 until 2006. These institutions and companies, or “providers,” offered a type of contract, known as an investment agreement, to state, county and local governments and agencies throughout the United States. The public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects. Goldberg also participated in the conspiracies while employed at Financial Security Assurance Capital Management Services LLC (FSA).

According to evidence presented at trial, Carollo, Goldberg and Grimm and their co-conspirators corrupted the bidding process for dozens of investment agreements to increase the number and profitability of investment agreements awarded to the provider companies where they were employed. Carollo, Goldberg and Grimm deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities for various public works projects, such as for building or repairing schools, hospitals and roads. Evidence at trial established that they cost municipalities around the country millions of dollars.

“Fundamentally, this case is about fraud in the investment of public money,” said Janice K. Fedarcyk, Assistant Director in Charge of the FBI in New York. “The actions of the defendants denied public entities the benefits of true competitive bidding, and artificially depressed the yield on invested public funds. ”

“Today’s convictions are an important step forward in the coordinated effort by the IRS and the Department of Justice to aggressively rid the municipal bond industry of unfair and corrupt practices,” said Internal Revenue Service (IRS)-Criminal Investigation (IRS-CI) Special Agent in Charge Victor W. Lessoff. “Moreover, the convictions represent an important victory for America’s taxpayers, especially those who live in the municipalities harmed by the actions of the defendants. ”

A total of eighteen individuals have been charged as a result of the department’s ongoing municipal bonds investigation. Including today’s convictions, a total of 15 individuals have been convicted and three await trial. Additionally, one company has pleaded guilty.

Each of the fraud conspiracy charges carries a maximum penalty per count of five years in prison and a $250,000 fine. The maximum fines for the fraud conspiracy offense may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

The verdict announced today resulted from an ongoing investigation conducted by the Antitrust Division’s New York Office, the FBI and the IRS-CI. The division is coordinating its investigation with the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.

Today’s convictions are part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force, visit www.StopFraud.gov.

Anyone with information concerning bid rigging and related offenses in any financial markets should contact the Antitrust Division’s New York Field Office at 212-335-8000, the FBI at 212-384-5000 or IRS-CI at 212-436-1761, or visit www.justice.gov/atr/contact/newcase.htm.

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NEW JERSEY FINANCIAL INVESTOR AND HIS COMPANY PLEAD GUILTY TO
BID RIGGING AT MUNICIPAL TAX LIEN AUCTIONS

WASHINGTON — A financial investor who purchased municipal tax liens at auctions in New Jersey, as well as a company in which he was a partner, pleaded guilty today for their roles in a conspiracy to rig bids for the sale of tax liens auctioned by municipalities throughout the state, the Department of Justice announced.

A felony charge was filed today in the U.S. District Court for the District of New Jersey in Newark, N.J., against David Butler of Cherry Hill, N.J. A charge was also filed against DSBD LLC, a New Jersey company responsible for managing tax lien investments in which Butler had a partnership interest. Under the plea agreements, which are subject to court approval, Butler and DSBD have each agreed to cooperate with the department’s ongoing investigation.

According to the felony charges, from at least as early as the beginning of 2005 until approximately February 2009, Butler and his company participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey by agreeing to allocate among certain bidders on which liens to bid. The department said that both Butler and DSBD proceeded to submit bids in accordance with their agreements and purchased tax liens at collusive and non-competitive interest rates.

“The Antitrust Division is committed to holding accountable those who seek to exploit and undermine the competitive process at municipal tax lien auctions,” said Acting Assistant Attorney General Sharis A. Pozen in charge of the Department of Justice’s Antitrust Division. “The division will continue to work with its law enforcement partners to prosecute those who harm our local communities by engaging in this kind of anticompetitive conduct in municipal tax lien auctions.”

The department said that the primary purpose of the conspiracy was to suppress and restrain competition to obtain selected municipal tax liens offered at public auctions at non-competitive interest rates. When the owner of real property fails to pay taxes on that property, the municipality in which the property is located may attach a lien for the amount of the unpaid taxes. If the taxes remain unpaid after a waiting period, the lien may be sold at auction. State law requires that investors bid on the interest rate delinquent homeowners will pay upon redemption. By law, the bid opens at 18 percent interest and, through a competitive bidding process, can be driven down to zero percent. If a lien remains unpaid after a certain period of time, the investor who purchased the lien may begin foreclosure proceedings against the property to which the lien is attached.

According to the court documents, Butler and DSBD conspired with others not to bid against one another at municipal tax lien auctions in New Jersey. Since the conspiracy permitted the conspirators to purchase tax liens with limited competition, each conspirator was able to obtain liens which earned a higher interest rate. Property owners were therefore made to pay higher interest on their tax debts than they would have paid had their liens been purchased in open and honest competition.

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum penalty for a corporation is a $100 million criminal fine. The maximum fine for a Sherman Act violation may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the statutory maximum.

Today’s guilty pleas are the eighth and ninth pleas resulting from an ongoing investigation into bid rigging or fraud related to municipal tax lien auctions. On Aug. 24, 2011, Isadore H. May, Richard J. Pisciotta Jr. and William A. Collins each pleaded guilty to one count of bid rigging in connection with their participation in a conspiracy to allocate liens at New Jersey auctions. On Feb. 23, 2012, Robert W. Stein and David M. Farber also pleaded guilty to conspiring to allocate liens at municipal tax lien auctions in New Jersey. On March 27, 2012, Robert E. Rothman pleaded guilty for his role in a conspiracy to rig bids for the sales of tax liens auctioned by municipalities throughout New Jersey. On April 17, 2012, Stephen E. Hruby also pleaded guilty for his role in a conspiracy to rig bids for the sale of tax liens auctioned by municipalities throughout New Jersey.

Today’s charges are part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF). President Obama established the interagency FFETF to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov.

The ongoing investigation is being conducted by the Antitrust Division’s New York Field Office and the FBI’s Atlantic City, N.J., office. Anyone with information concerning bid rigging or fraud related to municipal tax lien auctions should contact the Antitrust Division’s New York Field Office at 212-335-8000, visit www.justice.gov/atr/contact/newcase.htm or contact the FBI’s Atlantic City Resident Agency at 609-677-6400.