UPDATE 2-CDR Financial, execs indicted in muni bond probe

* Firm, two current executives and a former indicted

* Firm had been probed by New Mexico grand jury (Adds background from indictment)

By Diane Bartz

WASHINGTON, Oct 29 (Reuters) - A California financial products firm, two current executives and a former executive were indicted on Thursday for bid rigging and fraud related to municipal bond contracts, the Justice Department said.

The indictment filed in the U.S. District Court for the Southern District of New York named CDR Financial Products Inc, also known as Dunhill Insurance Services Inc. The company had been at the center of an earlier probe that cost New Mexico Governor Bill Richardson a shot at being President Barack Obama's commerce secretary.

Richardson withdrew his name from consideration because of a separate grand jury probe in New Mexico into allegations that CDR's donations to his political action committees were linked to its winning a state contract worth $1.4 million.

The current probe focuses on an alleged conspiracy dating back to 1998. The indictment charges that CDR and its executives rigged bids for investment agreements. The money invested was primarily cash municipalities had raised for public projects but did not need immediately.

The indictment says CDR and its executives took kickbacks from investment managers to decide in advance that they would win the right to manage the funds for lucrative payments.

The indictment names CDR along with David Rubin, its owner and president, Vice President Evan Andrew Zarefsky and former Chief Financial Officer and Managing Director Zevi Wolmark, also known as Stewart Wolmark, the Justice Department said.

Attempts to reach CDR, Rubin, Wolmark and Zarefsky were not immediately successful.

"The indictment charges that CDR, Rubin, Wolmark and Zarefsky secretly manipulated and controlled the competitive bidding process in numerous ways to enrich themselves and the co-conspirator providers of the investment agreements, at the expense of the municipalities, the IRS, or both," the Justice Department said.

The department said the charges were the first to be filed in its ongoing bid-rigging investigation into the municipal bond industry.

A Richardson aide said the indictment did not mention CDR's business dealings in New Mexico.

"It doesn't appear that any of the issues they were indicted on had anything to do with New Mexico," said Gilbert Gallegos, a spokesman for Richardson. (Reporting by Jeremy Pelofsky, Diane Bartz and Jim Christie; Editing by David Gregorio)