A former Bank of America (BAC) executive was sentenced Monday to 26 months in prison after defrauding municipal bond investors and others, the Justice Department says.
Phillip D. Murphy, a managing director with BofA’s muni derivatives group from 1998 to 2002, pleaded guilty to the charges on Feb. 10, 2014.
He admitted to participating in multiple fraud conspiracies and schemes with various financial institutions and brokers from 1998 through 2006. BofA and other financial institutions served as “providers,” according to the DOJ, and “offered a certain type of contract — known as an investment agreement — to state, county and local governments and agencies, and not-for-profit entities, throughout the United States.
“Murphy conspired with [muni broker CDR Financial Products] and others to increase the number and profitability of investment agreements and other municipal finance contracts awarded to Bank of America,” the DOJ explained in a press release. He “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.”
Because of the schemes, various providers won investment agreements and other municipal finance contracts at artificially determined prices. Murphy also submitted intentionally losing bids for certain investment deals when requested and occasionally “agreed to pay or arranged for kickbacks to be paid to CDR and other co-conspirator brokers,” the DOJ adds.
As part of the bid rigging, Murphy and his co-conspirators submitted numerous false certifications to municipalities and the Internal Revenue Service, which prompted some municipalities to award contracts to Bank of America and other providers “based on false and misleading information,” according to the Department of Justice.
“Individual accountability is the cornerstone of protecting the integrity of our financial markets,” said Deputy Assistant Attorney General Brent Snyder of the Antitrust Division’s Criminal Enforcement Program, in a statement. “This sentence is a result of our continued resolve to vigorously prosecute bank executives whose greed and illegal schemes undermine our free and fair financial markets.”