WASHINGTON, Feb 10 (Reuters) - 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.