Natixis Funding Corp. and Societe Generale will pay a combined $56.7 million settlement for fraudulent and anticompetitive municipal bond dividend transaction practices that harmed nonprofits, school districts, municipalities, counties and government agencies. A total of $53,865,000 of the sum will be paid into a settlement fund to be applied toward restitution for the affected parties.
New York Attorney General Eric T. Schneiderman announced the settlement. Connecticut Attorney General George Jepsen collaborated on the investigation along with the U.S. Department of Justice, federal regulatory agencies and officials from more than 20 other states. A total number of organizations impacted by the fraudulent practices is not disclosed in the settlements, nor are organizations listed by name.
The City of Baltimore, Bucks County Water & Sewer and Central Bucks School District are the listed plaintiffs in both settlements.
Similar settlements were reached with Bank of America, JP Morgan Chase, UBS, GE Funding Capital Market Services and Wachovia between Dec. 2010 and Dec. 2011, totaling about $350 million.
Tax-exempt entities such as nonprofits, municipalities and school districts issue municipal bonds and reinvest proceeds until funds are needed or contracts are entered into to hedge interest rate risk, according to Schneiderman’s release.
Those contracts were impacted by “an illegal agreement, understanding and conspiracy” based on per se illegal horizontal communications, according to both settlements. Competition for contracts was restrained through a number of methods including rigging bids, secret compensation for losing bidders, courtesy bids, deliberately losing bids and agreements not to bid.
“Brokers have knowingly participated in this per se legal conspiracy to limit competition by acting as conduits for communication of pricing and bidding information among providers with the knowledge and consent of providers and have shared the wrongful profits of the illegal agreement to restrain competition,” both settlements read, in part.
Testimony from past criminal trials is featured in the settlements and illustrates the behind-the-scenes nature of the contract bidding processes.
“Schemes that defraud the public sector and nonprofits harm the people those entities serve,” Schneiderman said in a statement. “We will not tolerate this type of misconduct at any level, especially as we work to restore public faith in our economic institutions.”
As we celebrate our 36th year, NPT remains dedicated to supplying breaking news, in-depth reporting, and special issue coverage to help nonprofit executives run their organizations more effectively.