On Monday, in a criminal trial in New York, a federal prosecutor said that the defendants, three former UBS executives had helped cheat U.S. cities and towns by a scheme used to rig bids for investing in municipal bond proceeds. The three former UBS executives, Peter Ghavami, Gary Heinz and Michael Welty had been charged by the U.S. Department of Justice in 2010, as part of its investigation into the $3.7 trillion U.S. municipal bond market. The probe focused on revealing schemes to fix prices and rig bids on municipal bond transactions and has so far floored some of the largest banks in the world.
In her opening statement, Justice Department Prosecutor Kalina Tulley told the jury that the three men “steered financial contracts to their friends in exchange for kickbacks and other favors.” The trial is on at the U.S. District Court in Manhattan.
However, the lawyers for the defendants said that their clients were wrongly targeted in the investigation and that the U.S. case was built on a series of lies fed by co-conspirators turned government cooperators. The attorney for Heinz, Marc Mukasey told the jury, “You will find no evidence that 11 years ago, a 27-year old Gary Heinz went to work intending to defraud anyone.” He said that the government case was flimsy because it rested on witnesses who provided a “version of events that’s fake, that’s phony and that’s false.”
The three bankers are charged for conspiracy to commit wire fraud and for rigging bids in 2001 and 2002 for guaranteed investment contracts, which cities and counties use to park proceeds from the sales of municipal bonds. Each of the defendants were charged with three counts with each of the conspiracy charges carrying a maximum of five years in prison.
Ghavami, a Belgian national, left UBS in 2007 from the position of the global head of commodities. Both Heinz and Welty used to work on UBS’ municipal bond reinvestment and derivatives desk at the time when the offenses are suspected of having taken place.
The case is USA v. Peter Ghavami et al, U.S. District Court, Southern District of New York, No. 10-cr-1217.