Ex-financial adviser gets probation in muni bond case

NEW YORK Fri May 17, 2013 3:41pm EDT

NEW YORK (Reuters) - A former chief executive of a financial firm who pleaded guilty to charges stemming from a probe into bid-rigging in the municipal bond market was sentenced to two years probation on Friday by a judge who cited his cooperation with U.S. investigators.

Martin Kanefsky, who was the chief of the now-defunct Kane Capital Strategies Inc, pleaded guilty in April 2010 to fraud and conspiracy charges related to his role in a scheme to manipulate bids for investment agreements and municipal finance contracts.

Kanefsky is the only individual out of eight sentenced so far in a broad government investigation of the $3.7 trillion U.S. municipal bond market not to receive jail time.

At least 19 people have been convicted or pleaded guilty in connection with the probe, which centered on rigging returns paid on short-term investments made with bond proceeds. Among those convicted were bankers who worked at General Electric Co, UBS AG, JPMorgan Chase & Co.

Five financial institutions including Bank of America Corp, UBS, GE, JPMorgan and Wachovia N.A., now owned by Wells Fargo & Co, agreed to pay about $743 million to settle the investigations.

In handing down the sentence, U.S. District Judge Robert Patterson in Manhattan said to Kanefsky, "It's not often defendants come before me who have cooperated as fully as you have."

Kane Capital, which was based in Great Neck, New York, had been hired by municipalities to run bidding for the investment products they bought through bond offerings.

Prosecutors said Kanefsky engaged in two conspiracies, the earliest of which dated to 1999, in which he gave employees at other firms information about prices or considerations for their competitors' bids in violation of U.S. Treasury regulations.

"I had no right to substitute my judgment for the rules," Kanefsky, 63, told the court on Friday. "Nothing excuses this."

Kanefsky had been providing information to prosecutors since August 2008, a year and a half before his guilty plea, prosecutor Steven Tugander said at the hearing.

Among the cases Kanefsky assisted with was the prosecution of three former executives at GE affiliates, who were convicted following a trial in May 2012, Peter Chavkin, Kanefsky's lawyer, said after the hearing.

In addition to probation, Patterson ordered Kanefsky to pay a $30,000 fine and perform 200 hours of community service.

Kanefsky had agreed in 2011 to pay $250,000 to settle a related investigation into municipal bid rigging by attorneys general in 24 states and the District of Columbia.

The case is United States v. Kanefsky, U.S. District Court, Southern District of New York, No. 10-cr-00721.

(Reporting by Nate Raymond in New York; additional reporting by David Ingram in Washington; Editing by Martha Graybow and Leslie Adler)

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