Bond bid-rigging fallout
Hospitals get nearly $9 million in settlement
The Securities and Exchange Commission and 20 state attorneys general reached settlements with Banc of America Securities over allegations a marketing group rigged bids for municipal bond derivatives. The settlements, combined with the bank’s separate settlements reached with the Internal Revenue Service and Office of the Comptroller of the Currency, totaled $137 million.
Not-for-profit hospitals and health systems in California, Minnesota, Oklahoma and Tennessee will receive nearly $9 million of the SEC’s $36.1 million settlement deal, according to the agency’s order.
According to the SEC order, Banc of America Securities’ municipal reinvestment and risk management group, a marketing group for municipal debt derivatives, paid kickbacks or undisclosed gratuitous payments to agents that gave the bank information on competing bids to invest municipal bond proceeds.
Not-for-profit and government borrowers invest tax-exempt debt until it can be spent for capital projects through a competitive bidding process, the SEC said. The SEC order alleged agents also procured “set ups,” or rival bids that could not compete with Banc of America Securities. The order claimed Banc of America Securities also provided “set ups” for agents.
“As a result, these improper bidding practices affected the prices of the reinvestment products and jeopardized the tax-exempt status of the underlying municipal securities,” the SEC said in a news release announcing the order.
Under the settlement agreements, Banc of America Securities did not admit or deny the allegations. The Justice Department said in a news release that parent company Bank of America reported the alleged wrongdoing prior to an investigation.