WASHINGTON Feb 10 A former Bank of America
executive pleaded guilty on Monday to conspiring to defraud
cities and towns, looking to invest proceeds for municipal
bonds, the Justice Department said.
Phillip Murphy, who was a managing director of Bank of
America's municipal derivatives desk from 1998 to 2002, pleaded
guilty to conspiring to make false entries in reports and other
papers sent from his desk to bank management. The scheme ran
from about 1998 to 2006.
Bank of America Corp had agreed in December to pay
$20 million to settle a lawsuit brought by the City of Baltimore
and other plaintiffs, in which investors accused it of rigging
bids for municipal securities, according to court papers.
After selling bonds, municipalities park the proceeds in the
interest-bearing contracts until they need the funds for work on
the project they have financed.
Some of the world's largest banks have been ensnared in an
investigation into allegations that their employees decided in
advance which investment house would win the auctions of these
guaranteed investment contracts - essentially investments that
cities and counties buy with proceeds from municipal bond sales.
A total of 17 people, including Murphy, have been convicted
in the probe or pleaded guilty.
Bank of America said in a 2007 statement that it was
cooperating with the Justice Department in the probe, and had
won amnesty for that cooperation.
In mid-December, a former JPMorgan Chase & Co vice
president received no prison time after pleading guilty and
cooperating with authorities investigating the scheme. James
Hertz, 56, pleaded guilty to wire fraud and conspiracy charges
in 2010 and cooperated in a wide-ranging investigation of the
$3.7 trillion U.S. municipal bond market.
Other brokers who settled or were convicted were from UBS AG
and General Electric Co's, among others.