Over a dozen Wall Street firms, including Bank of America Corp., JP Morgan Chase & Co., UBS AG and the financial services arm of General Electric Co. have been implicated in a conspiracy to defraud taxpayers, Bloomberg.com and Reuters reported today. The allegations are part of an ongoing case against CDR Financial Products Inc. Executives at CDR were indicted back in October for allegedly fixing auctions of investments in exchange for kickbacks from firms previously unnamed in court documents. Filings made today, however, reveal that the firms in question are some of Wall Street’s most powerful companies. CDR allegedly fixed interest rates of guaranteed investment contracts—investments that are a lot like Certificates of Deposit (or CDs). These contracts are typically sold by cities and states using funds raised from municipal bond sales. Municipal bonds generate capital meant to fund infrastructure projects and construction. If such projects are not shovel-ready though, governments often put some of the money towards investments like guaranteed investment contracts as a way to earn interest. By allegedly fixing interest rates at a below market value rate, CDR defrauded taxpayers out of funds for important civic projects. Bloomberg reports that kickbacks from firms receiving the low interest rate contracts were hidden in other transactions the companies had with CDR. This is not the first time CDR has been in hot water—Reuters reminds us that CDR donated $100,000 to New Mexico Governor Bill Richardson’s political action committee back in 2008 around the same time it received a highly lucrative state contract. Richardson removed himself from President Obama's shortlist for commerce secretary following these revelations.
About the reporter
Marissa Colón-Margolies is a writer and editor based in Brooklyn, NY.