I wonder if the editors at Bloomberg realize the seriousness of the claim that’s being made in this article:
A telephone call between a financial adviser in Beverly Hills and a trader in New York was all it took to fleece taxpayers on a water-and-sewer financing deal in West Virginia. The secret conversation was part of a conspiracy stretching across the U.S. by Wall Street banks in the $2.8 trillion municipal bond market.
The workings of the conspiracy — which stretched from California to Pennsylvania and included more than 200 deals involving about 160 state agencies, local governments and non- profits — can be pieced together from the Justice Department’s indictment of CDR, civil lawsuits by governments around the country, e-mails obtained by Bloomberg News and interviews with current and former bankers and public officials.
“The whole investment process was rigged across the board,” said Charlie Anderson, who retired in 2007 as head of field operations for the Internal Revenue Service’s tax-exempt bond division. “It was so commonplace that people talked about it on the phones of their employers and ignored the fact that they were being recorded.”
Anderson said he referred scores of cases to the Justice Department when he was with the IRS. He estimates that bid rigging cost taxpayers billions of dollars. Anderson said prosecutors are lining up conspirators to plead guilty and name names.
Conspiracy to defraud is criminal conspiracy—a felony. Prison time. Securities fraud is one of the criminal actions that are designated under Racketeer Influenced and Corrupt Organizations Act (RICO). Assets could be seized, performance bonds required, and it could result in forfeiture. Treble damages could be involved. The sums could be astronomical. If the conspiracy can be proven and it’s as broad as is being suggested it could be earth-shattering.
Understand further: the payments that were allegedly paid in these cases were significantly large as to require some level of management approval. There is no way management did not know this was afoot.
Exactly. That’s why I think this may be criminal enterprise kind of stuff. Sounds like a good time to be short on bank stocks.
Clusterstock has a handy summary of the Bloomberg article. Their assessment: Holy cow!. Holy cow, indeed. The Clusterstock article also notes that in China they execute people for stuff like this.
Basically, all of the biggest banks in the country are alleged to be involved in this activity. What happens when too big to fail meets impossible to keep afloat?