WASHINGTON — A former municipal derivatives trading desk manager at Banc of America Securities LLC has pleaded guilty to one criminal count of engaging in a conspiracy to falsify bank records in connection with a scheme to rig bids and pay kickbacks for investment agreements and other financial contracts in the muni market.
In an “information” document released Wednesday, the Justice Department said Brian Scott Zwerner managed the derivatives trading desk at “Bank A” from around July 1998 to October 2002.
Although, the department did not name the bank, records at the Financial Industry Regulatory Authority shows Zwerner worked at Banc of America Securities from May 1999 to April 2005. He currently is employed at FIG Partners LLC in Atlanta, an employee-owned broker-dealer specializing in financial institutions. According to FIG, Zwerner was at Banc of America in London and Chicago from 1998 to 2005.
The Justice Department said that, between January 1999 and May 2002, Zwerner and his co-conspirators falsified bank records relating to marketing profits so that the bank could pay kickbacks to brokers, including Rubin/Chambers, Dunhill Insurance Services Inc., now known as CDR Financial Products Inc. in Beverly Hills. The department did not identify the co-conspirators, saying only that they included “Head Marketer A, Marketer A-1, and Marketer A-2.”
Zwerner and the co-conspirators understated the marketing profits on trade tickets for certain investment agreements or other muni finance contracts so that money could be held back and accumulated in an off-the-books account — called “the kitty” — in order to pay kickbacks. Zwerner and the others deceived the bank’s officers about the money they held back and did not report it to them, according to the Justice Department.
The kickbacks were made in return for CDR and other brokers manipulating the bidding process so that the bank would be the winning provider for certain investment agreements and contracts.
The conspiracy count for which Zwerner is charged carries a maximum penalty of five years in prison and a $250,000 fine.
A lawyer representing Zwerner declined to comment.
While the other co-conspirators are not named, Douglas Campbell, a former senior vice president and marketer in the Banc of America Securities’ muni derivatives group pleaded guilty to three criminal counts in connection with the probe in September 2010.
In addition, Phil Murphy, former managing director of the group, was notified in 2007 and 2008 that he was under investigation in connection with the probe. P. Jay Saunders, a vice president with the group, was notified in 2007 that he was a target of a grand jury investigation. Neither is currently registered with a broker-dealer firm registered with FINRA.
This is the ninth guilty plea to arise from an ongoing antitrust investigation being conducted by the Justice Department, the Federal Bureau of Investigation and the criminal division of the Internal Revenue Service. The agencies are coordinating their investigation with the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.
CDR Financial Products, its founder David Rubin, former chief financial officer Zevi “Stewart” Wolmark, and vice president Evan Andrew Zarefsky were indicted by a federal grand jury on Oct. 29, 2009, on nine criminal counts in connection with the Justice Department probe. The trial in that case is expected to begin on Jan. 9.
In addition, three other former CDR employees have pleaded guilty to bid-rigging and fraud conspiracies in connection with the probe. Five additional individuals who worked at other firms also have pleaded guilty.
Register or login for access to this item and much more
All Financial Planning content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access