Reuters: Regulatory News: UPDATE 1-Three ex-UBS bankers guilty in muni bond rigging case

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UPDATE 1-Three ex-UBS bankers guilty in muni bond rigging case Aug 31st 2012, 18:22 Fri Aug 31, 2012 2:22pm EDT * Part of U.S. probe of $3.7 trillion muni bond market * Three ex-UBS employees among 19 charged in probe * Defense lawyer indicates appeal likely By Basil Katz and Grant McCool NEW YORK, Aug 31 (Reuters) - Three former UBS AG executives were convicted on Friday of conspiring to deceive U.S. cities and towns by operating a scheme to rig bids to invest municipal bond proceeds. The verdict by a federal court jury in Manhattan is the latest victory for the U.S. Department of Justice in its broad investigation of the $3.7 trillion U.S. municipal bond market. The widespread probe has touched some of the world's largest banks. The three defendants, Peter Ghavami, Gary Heinz and Michael Welty, were charged in 2010 as part of a probe focused on rooting out schemes to fix prices and rig bids on bond transactions. The former bankers denied wrongdoing and said government witnesses had lied to ensnare them. Each defendant was found guilty on two counts of conspiracy. The jury also convicted Heinz and Welty on other charges, but found Welty not guilty on one wire-fraud count, and Heinz not guilty of witness tampering. Heinz was the only one of the three to face that charge. Ghavami, a Belgian national, left UBS in 2007 as global head of commodities. Both Heinz, of Jersey City, New Jersey, and Welty, of New York, worked on UBS' municipal bond reinvestment and derivatives desk at the time of the suspected offenses. The two conspiracy charges involved rigging bids in 2001 and 2002 for guaranteed investment contracts, which cities and counties use to park proceeds from municipal bond sales. The conspiracy charges carry a maximum of five years in prison each. No sentencing date has been set. Charles Stillman, a lawyer for Ghavami, told reporters: "We are obviously disappointed with the verdict. We are looking forward to an appeal ... " Lawyers for the other two defendants declined to comment. Stillman told the jury in his closing arguments this week that his client "did nothing more than his job entirely in good faith and that he never intended to and never did cheat a municipality, the Internal Revenue Service, anyone." During the trial, the jury heard from government witnesses who pleaded guilty to similar crimes and agreed to testify against the defendants, and also heard audio recordings of conversations between the bankers. "It was fraud, plain and simple. It involved greed, deception and betrayal," prosecutor John Van Lonkhuyzen said in his closing statement to the jury on Aug. 27. The jury began deciding the case on Wednesday afternoon. The trial began on July 30. "It was horrendously difficult. It was a big deal, what we had to weigh," said one juror, who asked not to be identified, after the verdict. Thirteen people and one company have pleaded guilty to charges stemming from the bid-rigging investigation. A total of 19 people have been charged. The U.S. government has a 10-year window to bring criminal charges over suspected crimes that affect financial institutions. In this case, since the three bankers were charged in December 2010, the case falls within the statute of limitations, U.S. District Judge Kimba Wood has ruled. In May, three former financial executives were convicted of similar charges by another federal jury in Manhattan. In July, former JPMorgan Chase & Co banker Alexander Wright pleaded guilty to one count of conspiracy to commit wire fraud for manipulating the bidding process for a June 2002 contract. Wright and former UBS employee Mark Zaino testified for the government at the trial of the former UBS executives. Zaino pleaded guilty in 2010 to bid-rigging charges. The case is USA v. Peter Ghavami et al, U.S. District Court for the Southern District of New York, No. 10-cr-1217. Link this Share this Digg this Email Reprints

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