North Carolina Department of Justice
North Carolina Department of Justice
North Carolina Department of Justice
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NC reaches fifth settlement in bid rigging investigation, AG Cooper says

Release date: 12/23/2011

Settlement includes restitution for Durham and Wake County agencies

Raleigh: A fifth financial firm will pay millions of dollars for its part in a bid rigging scheme that defrauded local governments and non-profit agencies, Attorney General Roy Cooper said today.
As part of a multistate settlement, GE Funding Capital Market Services on behalf of its affiliates Trinity Funding Company and Trinity Plus Funding Company will pay $34.25 million to North Carolina and 25 other states.
“Manipulating the system hurts non-profits and agencies funded by taxpayers,” Cooper said. “During these tough budget times, these deserving groups will get some much needed money back.”
GE Funding has agreed to pay $30 million in restitution to affected state agencies, municipalities, school districts and not-for-profit entities nationwide that entered into guaranteed investment contracts with GE Funding and Trinity Funding Company, and Trinity Plus Funding Company, between 1999 and 2005.  In addition, GE Funding agreed to pay a $1.25 million civil penalty and $3 million for fees and costs of the investigation to the settling states.
Under the settlement, North Carolina governments and non-profits that were injured by the scheme will get money back, including approximately $365,000 to be shared by the following entities in North Carolina: Durham Housing Authority, Raleigh Housing Authority, North Carolina Housing Finance Agency and Wake County.
The settlement resolves allegations that Trinity Funding and Trinity Plus Funding defrauded cities and counties, schools, colleges, hospitals and other entities that purchased a type of investment called municipal bond derivatives. 
GE Funding is the fifth financial institution to settle in the ongoing municipal bond derivatives investigation following Bank of America, UBS AG and JP Morgan and most recently Wachovia. To date, the state working group has obtained settlements worth almost $350 million.
This is the fifth settlement Cooper’s office has reached regarding municipal bond derivatives as part of an ongoing multistate investigation. 
In December 2010, Bank of America agreed to pay $3.4 million to North Carolina local governments, schools and non-profits as part of a $67 million multistate settlement. In May 2011, UBS agreed to pay $252,995 to entities in North Carolina as part of a $90.8 million multistate settlement.  In July 2011, JP Morgan Chase (JPMC) agreed to pay $126,326 to North Carolina entities as part of a $92 million multistate settlement. Earlier this month, Wachovia, now Wells Fargo, agreed to pay $2 million to North Carolina as part of a $58 million multistate settlement. 
Governments and non-profits use municipal investment derivatives to reinvest the proceeds from tax-exempt bond offerings until the funds are needed or to guard against fluctuating interest rates.  In April 2008, North Carolina and the other states began investigating allegations that some banks, insurance companies, brokers and swap advisors had engaged in deceptive and fraudulent conduct in the municipal bond derivatives market.
The ongoing investigation has so far revealed that GE Funding, Wachovia, JPMC, UBS and Bank of America along with certain brokers kept the process from being fair by rigging bids and submitting non-competitive courtesy bids.
The alleged schemes benefited financial institutions or brokers at the expense of state agencies, towns, cities, school districts, non-profits and the taxpayers who fund them. As a result, governments and non-profits got artificially low rates of return on these investments or paid higher rates than they should have.
“Businesses can play by the rules and still make a profit,” Cooper said. “We’ll continue to go after companies that find ways to prevent fair competition.”

  Contact:  Noelle Talley, (919) 716-6413