Ex-brokerage employees avoid prison in U.S. muni bid-rigging case

NEW YORK Thu May 8, 2014 1:57pm EDT

NEW YORK May 8 (Reuters) - Two former employees of a California brokerage who became cooperating witnesses in a broad U.S. government investigation of bid-rigging in the $3.7 trillion municipal bond market avoided prison time at their sentencing Thursday.

Dani Naeh, 47, and Douglas Goldberg, 42, both pleaded guilty in 2010 to charges including conspiracy to restrain trade and wire fraud arising out of their work at CDR Financial Products Inc, once one of the largest U.S. brokers of municipal bond proceed investment contracts.

During court hearings in Manhattan, U.S. District Judge Harold Baer cited the long cooperation of the two former CDR employees in sentencing them to no prison or probation time, saying during Naeh's case that incarceration would "probably be the wrong message."

Baer fined Naeh $100,000. He ordered no fine for Goldberg, citing concerns about his net income.

"Sorry is not a strong enough word for how I feel," Goldberg said at Thursday's hearing.

In pleading guilty, Naeh and Goldberg admitted to participating in a conspiracy from 1998 to 2006 in which CDR took kickbacks from investment managers in exchange for contracts to manage funds from municipal debt sales.

Naeh and Goldberg began cooperating with investigators in 2007, helping prosecutors build a case against Beverly Hills, California-based CDR and executives including David Rubin, its founder.

Rubin and CDR pleaded guilty to wire fraud and conspiracy charges in 2011 and agreed to cooperate in the probe. Rubin was sentenced in March to two years of probation and ordered to pay up to $5.65 million in fines and restitution.

Should he not pay the restitution, Baer said Thursday he may require Naeh and Goldberg to share in that obligation.

Authorities obtained numerous convictions as a result of the bid-rigging investigation, as well as $743 million in settlements with Bank of America Corp, UBS AG, General Electric Co, JPMorgan Chase & Co and Wells Fargo & Co.

Naeh and Goldberg testified in the bid rigging trial of three former bankers at General Electric's GE Capital unit, Steven Goldberg, Dominick Carollo and Peter Grimm.

A federal jury convicted the GE executives in 2012. But an appellate court vacated their convictions last year, and they were released from prison on Nov. 27. The Justice Department is seeking further appellate review of that ruling.

Goldberg also testified against three former UBS executives -- Peter Ghavami, Gary Heinz and Michael Welty -- who were convicted in 2012 for participating in frauds related to municipal bond proceed contracts. Their appeal is pending.

The cases in the U.S. District Court, Southern District of New York, are U.S. v. Naeh, No. 10-cr-00139, and U.S. v. Goldberg, No. 10-cr-00209. (Reporting by Nate Raymond in New York; Editing by Noeleen Walder and Andrew Hay)

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