BOSTON (Legal Newsline) - Massachusetts Attorney General Martha Coakley announced Tuesday she is suing an investment broker that allegedly engaged in bid rigging in the municipal bond investment business.
Tradition (North America), Inc., allegedly deceived the State by rigging prices and making false statements concerning Guaranteed Investment Contracts.
GIC investments are used for temporarily re-investing the proceeds of municipal bond issuances and pay a set interest rate for a specific period of time.
The lawsuit alleges that from at least 2000-2004, Tradition engaged in bid rigging by conducting the bidding process among the banks that sought to sell these GICs to Massachusetts, and certified to the State that the bidding process was competitive and that the winning bid would be the GIC that provided the highest yield.
"We believe Tradition's conduct here is very troubling," Coakley said.
""We allege in our lawsuit that Tradition lied to Commonwealth representatives and orchestrated a complicated bid rigging process, complete with code words and false names to hide the scheme. Tradition needs to be held accountable and we will be aggressively pursuing this matter."
Tradition allegedly created a rigged and corrupt bidding process favoring providers by leaking what other banks were bidding and informing them of what to bid in order to win the business. Tradition's alleged actions resulted in bids that offered Massachusetts less interest than it would have gotten if the bidding process had been truly competitive.
The lawsuit alleges that Tradition informed favored providers who had already indicated that they intended to offer certain high interest rates that they should offer less money to Massachusetts.
Trinity Plus Funding Company LLC, had indicated that it intended to submit an aggressively high interest rate in order to win the state's business. A Tradition agent told the company specifically to bid a lower interest rate. That agent has already pled guilty to wire fraud and conspiracy in federal court.
The suit further alleges that Tradition repeatedly deceived the State and provided false certifications regarding the bidding process.
Coakley is seeking statutory penalties under the False Claims Act and the Consumer Protection Act, injunctive relief to prevent the company from engaging in similar conduct, and damages and restitution.