Bloomberg -- Ex-UBS AG Managing Director Peter Ghavami and two former colleagues convicted of rigging municipal bond investment deals may be sentenced to less prison time than the government is seeking, a federal judge said.

U.S. District Judge Kimba Wood told prosecutors in Manhattan that she may reject their proposed calculations for losses from the scheme, an important factor in determining the sentencing range. Wood said her decision is tentative and may change before the defendants are sentenced today.

“I do not accept all of the elements included in the government’s loss estimates,” Wood said during a hearing yesterday. The government was unable to show in some cases “that the claimed losses are anything more than theoretical.”

In August, a jury found Ghavami and former colleagues Gary Heinz and Michael Welty guilty of wire-fraud conspiracy for rigging bids from August 2001 to July 2002 and arranging to pay kickbacks to the brokerage firm CDR Financial Products Inc. in exchange for help in manipulating auctions. Ghavami and Heinz were also found guilty of wire fraud.

The trial followed a five-year federal antitrust probe into the $3.7 trillion municipal bond market. Zurich-based UBS, Bank of America Corp. and other banks have paid more than $700 million to settle U.S. claims over the scheme.

Prosecutors have asked for sentences of at least 17 1/2 years for Ghavami, 19 1/2 years for Heinz and at least 11 1/4 years for Welty.


Issuers of tax-exempt municipal bonds must use competitive bidding when selecting firms to handle deals to invest the proceeds, the government said. The defendants conspired with employees at other financial firms to rig bids for municipal bond investment contracts, costing cities, schools and the U.S. Treasury Department more than $25 million in total losses, prosecutors said.

Wood tentatively calculated the total loss for the three men at about $7.7 million, and said that the amounts stemming from some of the deals, known as escrow transactions, were unclear.

While the loss amount would establish a lower guideline range than what prosecutors requested, Wood can still sentence the defendants outside of the range.

The case is U.S. v. Ghavami, 10-cr-1217, U.S. District Court, Southern District of New York (Manhattan).

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