Legal Newsline

Tuesday, January 21, 2020

Financial services firm pleads guilty to municipal bond fraud

By Michael P. Tremoglie | Jan 3, 2012

NEW YORK (Legal Newsline) - A financial products and services firm and its founder and owner have pleaded guilty to bid-rigging and fraud conspiracies involving investment of municipal bond proceeds and other related municipal finance contracts.

The Department of Justice announced the plea Friday of Beverly Hills, Calif.-based Rubin/Chambers, Dunhill Insurance Services (also known as CDR Finaicla Products) and CDR founder and owner David Rubin. U.S. District Judge Victor Marrero, of New York's southern district, took the plea.

Rubin and CDR, along with Zevi Wolmark, also known as Stewart Wolmark, the former chief financial officer and managing director of CDR, and Evan Andrew Zarefsky, a vice president of CDR, were indicted on Oct. 29, 2009. The trial for Wolmark and Zarefsky is scheduled to begin today.

CDR and Rubin pleaded guilty to participating in separate bid-rigging and fraud conspiracies with various financial institutions and insurance companies and their representatives. They offered a type of contract, known as an investment agreement, to state, county and local governments and agencies across the country. Primarily, these public entities wanted to invest the proceeds of municipal bonds that they had issued.

"Mr. Rubin and his company engaged in fraudulent and anticompetitive conduct that harmed municipalities and other public entities," said Sharis A. Pozen, DOJ's Acting Assistant Attorney General, Antitrust Division.

CDR was hired to act as a broker and conduct a supposed competitive bidding process for contracts for investing municipal bond proceeds. Competitive bidding for those contracts is the subject of regulations issued by the U.S. Department of the Treasury and is related to the tax-exempt status of the bonds, according to the DOJ.

Rubin admitted that, from 1998 until 2006, he and other co-conspirators supplied information to providers to help them win bids, solicited intentionally losing bids, and signed certifications that contained false statements regarding whether the bidding process for certain investment agreements complied with relevant Treasury Regulations, the announcement said.

He also admitted that he and other co-conspirators solicited fees from providers, which were in fact payments to CDR for rigging or manipulating bids for certain investment agreements so that a particular provider would win that agreement at an artificially determined price.

Rubin could receive a maximum penalty of 10 years in prison and a $1 million criminal fine for the bid-rigging conspiracy. The fraud conspiracy carries a maximum penalty of five years in prison and a $250,000 criminal fine. The wire fraud carries a maximum penalty of 20 years in prison and a $250,000 criminal fine.

CDR faces a maximum criminal fine on the bid-rigging charge of $100 million. The fraud conspiracy and wire fraud offenses with which CDR is charged each carry a maximum criminal fine of $500,000.

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