Bond bid-rig­ging fall­out

Hos­pi­tals get nearly $9 mil­lion in set­tle­ment

Modern Healthcare - - The Week In Healthcare - Melanie Evans

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.

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