SEC Charges BofA With Setting Up Fake Bids To Defraud Munis

The SEC has charged Banc of America with fraud for rigging municipal bond sales with dummy bids, defrauding hospitals, schools, and other state-run organizations. The bank will pay $137 million to settle these charges.

“The conduct was egregious,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “In return for business, the company repeatedly paid undisclosed gratuitous payments and kickbacks and affirmatively misrepresented that the bidding process was proper.”

When municipal bonds are bought by investors, municipalities usually invest the money for a short time before it gets used. By law, the decision about where to reinvest is supposed to go through a competitive bidding process. But Banc of America Securities (BAS) is charged with setting up sockpuppets to make purposely losing bids and steer the business back to BAS products. In return, BAS helped these other companies out by doing the same for them, as well as giving them “gratuitous payments.”

Elaine C. Greenberg, Chief of the SEC’s Municipal Securities and Public Pensions Unit, said, “This conduct threatened the integrity of the municipal marketplace, affecting not only the municipal issuers who were directly defrauded, but also the thousands of investors nationwide who purchased their tax-exempt municipal securities.”

Bank of America got some leniency in the deal because it disclosed the information itself to the government that launched the investigation. As such, it will not have to pay an additional financial penalty on top of the remuneration.

“Bank of America is pleased to put this matter behind it and has already voluntarily undertaken numerous remediation efforts,” said the company in a statement.

SEC Charges Banc of America Securities With Fraud in Connection With Improper Bidding Practices Involving Investment of Proceeds of Municipal Securities [SEC.gov]
ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS, PURSUANT TO SECTIONS 15(b) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER (PDF)
Bank of America (BAC) Agrees to Pay $137M to Settle Muni Cases [StreetInsider]

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  1. Doncosmic says:

    And the Golden Poo goes to…….

  2. RubyRedJess says:

    You mean BofA lies? WHAT? That’s incredible! o_0

  3. Loias supports harsher punishments against corporations says:

    One could say they are not shocked by this, but truly I am. It’s one thing to systematically screw over individual customers. Nearly all businesses deal with individual citizens without much regard and treat them as a source of one billionth their overall income.

    But treating other businesses – state-run organizations even – in such a manner really does lower the bar of BOA evilness.

  4. dolemite says:

    And again…no one goes to jail.

    But just let a citizen pirate a movie…uh oh…better call the FBI, because you are *the* scum of society.

    • Loias supports harsher punishments against corporations says:

      You should start complaining that the case didn’t go to verdict. Verdict result in jailtime and legal precedence. Allowing companies to just pay their way out of illegal activities and avoid a verdict helps no one but the company.

      • Firethorn says:

        I’m of the opinion that corporations, not actually being a person(I know about various laws and decisions treating them as such), that fining a corporation doesn’t do much.

        Instead, find the person or people responsable and fine THEM.

        If you can’t find individual blame, work your way up the chain for institutional blame. Much like what the military does – one guy does something stupid, it’s on him. If half a unit does something stupid, it’s on the commander of that unit, even if he didn’t have a clue, because it’s his JOB to have a clue.

        Given half a dozen cases like this, I’m willing to bet that we’d see a lot fewer of these shenanigans.

    • JohnnyP says:

      Then maybe we should all setup private corporations and do everything through the corporation instead in out names. That should keep us all out of jail.

      No I was not selling drugs Narcotics Unlimited was selling drugs.

  5. jessjj347 says:

    So how much money did they make off of these wrong-doings? Was it more than $137 million?

  6. comatose says:

    How nice for corporations that they’re not considered individuals able to be arrested for things like this, but their considered a person/entity for taxes and political contribution. I would myself like to become a corporation (not open a company, but my actual body.) That way I can make a ton of money, screw lots of people, pay no taxes, etc. Must be nice.

    • dolemite says:

      Good idea. Maybe I can clone myself and become a corporation. Reminds me of the comic “Evil Inc.” Basically all of the super villains decide to form a corporation in order to spread their evil because it is far more profitable and safe than the old fashion bank robbing and schemes to take over the world.

    • Michaela says:

      Corporations are taxable entities though. Nontaxable business forms include LLCs, Partnerships, and Proprietorships.

      Source: Survey of Accounting by Charles S. Warren (I am studying for my accounting final atm)

    • BurtReynolds says:

      Not being that schooled the particulars of business law, what would stop a private citizen from forming a corporation as a front for conducting personal business?

      Why can’t I form “Me Corp.” and go buy a house and car and walk away from the loans if I get in trouble like any other corporation would? I mean corporations with no discernable plan or ability to make profit are probably formed all the time.

      • wrjohnston91283 says:

        You can form an entity and buy a house with a mortgage with it. The problem is that the bank will make you as an individual sign a personal guarantee, since “Me Corp” isn’t credit worthy.

      • Michaela says:

        The difference would be that to make a corporation of oneself would change nothing, because a corporation is taxable and liable for its actions (at least on paper…obviously this isn’t always the case in real life).

        To set up a corporation, one must either sell stock in the corporation (and thus become a stock corporation) or have members who vote on matters of the corporation (and thus become a non-stock corporation). Therefore, to transform oneself into a corporation is to give up freedoms to a different group of individuals.

        That isn’t the problem though. The issue is again that a corporation is treated as a person in the scope of law (it can be taxed and charged with crimes). Therefore, what is the benefit of turning oneself into a corporation? You are still taxed. You are still liable for your actions (though they would be strongly influenced by whoever backs you).

        The only way you could probably create and entity and avoid taxation would be to hire a brilliant accountant.

  7. amgriffin says:

    $137 million is 15 minutes in time out for these guys.

  8. AngryK9 says:

    “The SEC has charged Banc of America with fraud for rigging municipal bond sales with dummy bids, defrauding hospitals, schools, and other state-run organizations. The bank’s customers will pay $137 million to settle these charges.”

    Fix’d

  9. galm666 says:

    And some people in America want uncontrolled corporations because…?

  10. StuckInACubicle says:

    “The SEC has charged Banc of America” Shouldn’t the word be bank.

    Sorry to be a grammar nazi but it’s in the description on the front page.

  11. davidsco says:

    But OH, I thought BOA had nothing to fear from a Wikileaks leak. They’re such upstanding citizens. I hope they bring the scumbags down

  12. DanKelley98 says:

    Crap…we’re about to get caught!

  13. Intheknow says:

    There’s just NOTHING good to say about BOA is there? Close them down!

  14. zantafio says:

    I posted it many times in other threads, but I will repeat it again: THE MAFIA IS RUNNING THOSE BANKS!!!

  15. flakeyblakee says:

    Banc of America, eh?

    • Tallanvor says:

      Banc of America Securities is a subsidiary of Bank of America, and yes, it’s actually spelled that way. Banc is an intentional misspelling of bank because the company wants to be thought of as a bank, but isn’t really (there are state and federal laws regarding the use of the word Bank in company names).

  16. Ken_L says:

    I know of an auctioneer and some real estate investors who rigged bids in a similar manner for properties being sold under the auspices of the Orphans’ Court in Washington, DC. (These properties were being sold out of decedents’ estates and the proceeds were to be split among the heirs.) The investors would decide before the auction as to who got which property, and the others either wouldn’t bid, or would place low bids.

    Fortunately, the investors and auctioneer were caught, and got jail time.

    Too bad none of the BoA executives face the same (justified) penalty.

  17. len says:

    How would the municipal governments have been better off had BoA not made the sockpuppet bids? Think it through.

  18. xanxer says:

    Why are these executives not being put in prison? They are defrauding EVERYONE. From the mortgage crisis, foreclosure fraud to bond fraud. These big banks need to be taught a lesson!

  19. zantafio says:

    What’s next? BofA defrauded an orphanage?

  20. Press1forDialTone says:

    I think the more publicity this gets the less muni business
    BofA will get and that’s ALL GOOD!

  21. dush says:

    So it was egregious but they only pay $137 million.

  22. Clyde Barrow says:

    Bank of America is pleased to put this matter behind it and has already voluntarily undertaken numerous remediation efforts,” said the company in a statement.

    Translation: Numerous remediation efforts on THIS issue only. Meanwhile, new numerous efforts are taking place by other staff to come up with new ideas to screw customer’s of more money until BofA gets caught, again.