Jepsen
HARTFORD, Conn. (Legal Newsline) - Connecticut Attorney General George Jepsen announced a $250,000 settlement on Thursday with the former CEO of a financial products and services firm in Great Neck, N.Y.
Martin Kanefsky, the CEO of Kane Capital Strategies, agreed to the settlement as part of a nationwide crackdown on alleged anticompetitive and fraudulent conduct in the municipal bond derivatives industry.
Under terms of the settlement, Kanefsky will pay $250,000 in restitution and cooperate into an ongoing review by a multistate working group of attorneys generals in 24 states and the District of Columbia. Connecticut is leading the review.
Kanefsky allegedly provided brokerage services through Kane Capital Strategies to governmental and not-for-profit entities looking to invest the proceeds of municipal bonds from 2001-2006.
In his role as a broker, it is alleged that Kanefsky solicited and received intentionally losing bids for certain investment agreements. He is also alleged to have provided co-conspirators at major financial institutions bidding against the investment agreements with information about the prices and price levels or conditions in competitors' bids. This practice is known as a "last look" and is prohibited by U.S. Treasury regulations.
"Last looks" allowed other marketers at financial institutions with whom Kanefsky had a close business relationship to see their competitors' bids before giving their own final bid.
The illegal "last looks" and bidding manipulation compromised what would otherwise have been a competitive bidding process, allowing co-conspirator financial institutions to win investment contracts at artificially determined price levels.
None of Kanefsky's clients was located in Connecticut and the state does not expect to share in the settlement money.
"Kanefsky did not broker any transactions in Connecticut," Jepsen said. "Nevertheless, in his role as a broker, Kanefsky had significant interactions with key co-conspirator marketers at several of the more culpable financial institutions involved in the various schemes. As a condition of his settlement, Kanefsky will provide the working group with direct inside knowledge of the schemes and how they worked."
Kanefsky is now the first broker to reach a settlement with the working group, which has obtained settlements valued at approximately $250 million with such entities as Bank of America, UBS AG and J.P. Morgan Chase.
The settlement with Kanefsky comes on the heals of a plea agreement he reached last year with the U.S. Department of Justice. Under the plea entered into with the DOJ's Antitrust Division, Kanefsky admitted to two counts of conspiracy and one count of wire fraud related to his role as a broker or bidding agent hired to conduct a competitive bidding process for the award of investment agreements.