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Conn. AG announces restitution payments from UBS AG

By Bryan Cohen | Mar 29, 2013

HARTFORD, Conn. (Legal Newsline) - Connecticut Attorney General George Jepsen announced that about $541,000 worth of restitution checks would be issued Thursday to 10 Connecticut entities as part of a 2011 multi-state settlement with a Swiss bank.

The 2011 settlement with UBS AG resolved allegations of anticompetitive and fraudulent activity in the municipal bond derivatives industry. The city of Stamford, the Connecticut Housing Finance Authority, the Hospital of Saint Raphael, the state of Connecticut, the city of Bridgeport, the Connecticut Student Loan Foundation, the University of the Sacred Heart in Fairfield, the Connecticut Municipal Energy Cooperative, the city of Norwalk and the South Center Connecticut Regional Water Authority will receive checks ranging from $7,442 to $164,104.

The Connecticut entities were among the entities nationwide that entered into municipal derivative contracts with UBS AG or used the bank as a broker for the transactions between 2001 and 2004. Twenty-four states and the District of Columbia received $90.8 million as part of the multi-state settlement.

"Connecticut government and not-for-profit entities are receiving rightful compensation for their losses arising from the wrongful conduct," Jepsen said. "A large amount of the funds entrusted to UBS AG was taxpayer money, which UBS steered into rigged or tainted municipal derivatives contracts."

UBS also reached separate, but coordinated, agreements with the Internal Revenue Service, the U.S. Securities and Exchange Commission and the U.S. Department of Justice's Antitrust Division.

"UBS AG did the right thing by providing meaningful restitution to those harmed and by continuing to cooperate in the ongoing investigation of the bank's co-conspirators," Jepsen said.

Municipal bond derivatives are contracts tax-exempt issuers can use to reinvest bond sale proceeds until funds are needed, or to hedge interest rate risk. In April 2008, the states looked into allegations that certain financial institutions used schemes such as bid-rigging and the submission of fraudulent certifications of compliance in the municipal bond derivatives market.

The multi-state working group has entered into settlements with five financial institutions worth close to $350 million for the states. In addition to UBS AG, the attorneys general reached settlements with Wachovia, JP Morgan, Bank of America and GE Funding Capital Market Services Inc.

The state of Connecticut received $2.9 million for attorney costs and civil penalties as part of the overall inquiry, which was deposited in the state's general fund.

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