Former UBS banker Mark Zaino walked out of court a free man Thursday after a federal judge chose to impose no further sentence on him for his role in rigging municipal bond contracts.

Zaino, who worked at the UBS AG bond desk in New York, pleaded guilty in May 2010 to one count each of conspiracy to restrain trade, conspiracy and wire fraud. He had faced a maximum of 35 years in prison and more than $1 million in fines.

After his plea, Zaino became a cooperating witness in trials against other bid-riggers, working with the government for eight years. His sentencing had been delayed many times.

"Although your offenses were very serious, the character you have shown in coming forward outweighs any wrongs you have committed," Judge Kimba Wood of the U.S. District Court of the Southern District of New York told Zaino at Thursday's sentencing in lower Manhattan.

She ordered no form of supervised release in allowing Zaino to go. She ordered no fine or restitution beyond a $300 special assessment.

"I live every day with regret and remorse," Zaino said in a brief speech in Room 9A of the Daniel Patrick Moynihan Courthouse in Foley Square.

Zaino apologized to municipalities that he victimized and to his family.

His case arose from a federal investigation of bid-rigging in the $3.8 trillion municipal bond market that goes back for more than a decade.

General Electric Co., Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and UBS AG have paid more than $700 million in restitution and fines related to charges of defrauding municipal issuers, the U.S. Treasury, and the Internal Revenue Service by corrupting the competitive bid process for guaranteed investment contracts and other municipal products.

"It was a very lenient sentence, indeed, which may not sit well with some people, but the purpose behind it is to demonstrate that there is a reward, if you will, for cooperating," said Anthony Sabino, a Mineola, N.Y., white-collar defense attorney and St. John's University law professor.

"Does it make what Mr. Zaino did any less bad?" he said. "No, but the bottom line is that when people become canaries, the government can accomplish a lot more."

Wood agreed with defense attorney Deborah Schwartz that Zaino's eight years of working "covertly and overtly" with U.S. Department of Justice antitrust prosecutors over eight years was tantamount to supervised release, and imposed none further.

"Mark and I said this morning that we were young when this case started," said Schwartz.

Wood, in not fining Zaino, cited his limited income from having been barred from the securities industry as part of his plea agreement. The government's ability to extract payments from guilty firms negated the need for restitution, she added.

"You deserve to be commended for everything you have done here," Wood told Zaino.

Zaino testified in April 2012 against former General Electric bankers Dominick Carollo, Steven Goldberg and Peter Grimm.

They were convicted but are out of jail after an appeals court ruled the statute of limitations on their charges had run out before the government charged them with criminal counts.

Zaino also testified against Michael Welty and two other convicted former UBS bankers, Peter Ghavami and Gary Heinz, who have moved for a new trial on the grounds that the government withheld evidence.

During U.S. v. Carollo et al, Zaino said he pleaded guilty "because I was." He told the court he helped fix bids by providing "indications" of where others were bidding, so-called last looks at other bids, and courtesy, or losing bids, all in exchange for back-end swap fees.

Zaino also said he conspired to keep more aggressive banks off the bid list, thereby minimizing competition and allowing a GE affiliate, FGIC Capital Market Services Inc., to win with the lowest possible bid.

Two weeks ago, Wood imposed $5.6 million in fines and restitution on CDR Financial Products Inc. founder David Rubin, but no prison time.

Sentencing for former CDR brokers Douglas Goldberg and Daniel Naeh is scheduled for May 8. Former Bank of America managing director Brian Zwerner's sentencing is set for July 25.

Wood sentenced "junk bond king" Michael Milken to 10 years in 1990, although Milken only served two, plus three years' probation. President Clinton considered Wood for U.S. attorney general in 1993, but withdrew after a controversy ensued over her hiring of a foreign-born nanny.

Paul Burton is a reporter for The Bond Buyer.

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