Prison Time for Three Former UBS Executives
7/24/2013 4:20:00 PM,
MANHATTAN (CN) - A federal judge sentenced three former UBS executives to at least a year each in prison for corrupting the competitive bidding process on public works projects.
At a five-week trial last summer, federal prosecutors showed that Peter Ghavami, Gary Heinz and Michael Welty participated in multiple fraud conspiracies and schemes between March 2001 and November 2006.
These conspiracies involved various financial institutions and a broker, the Justice Department said.
Prosecutors showed that Ghavami, Heinz and Welty conspired with other financial institutions and with a broker to corrupt the bidding process for more than a dozen investment agreements.
The investment deals were offered to the governments and agencies of various states, counties and localities, as well as nonprofit entities, throughout the United States.
Public entities use these kinds of investments, funded by the proceeds of municipal bonds and other sources, to raise money for public projects and other development, the Justice Department explained.
It added that public entities typically hire a broker to assist them in investing their money and to conduct a competitive bidding process to determine the winning provider.
The executives meanwhile corrupted this process to drive more volume and profits for UBS, prosecutors said.
Sometimes, the executives and their co-conspirators arranged for UBS to receive kickbacks in exchange for the manipulation, according to the government's case.
Ghavami, Heinz and Welty thus "deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities to refinance outstanding debt and for various public works projects, such as for building or repairing schools, hospitals and roads," the Justice Department added. "Evidence at trial established that they cost municipalities around the country and the U.S. Treasury millions of dollars."
The court reportedly heard evidence of 26 corrupted bids, including 76 recorded conversations made by the co-conspirator financial institutions.
Prosecutors said the corrupted deals involved Massachusetts; the New Mexico Educational Assistance Foundation; the Tobacco Settlement Financing Corporation of Rhode Island, the Hospital Authority of Forsyth County, Ga.; and the RWJ Health Care Corp. at Hamilton in New Jersey.
Ghavami, Heinz and Welty were convicted on Aug. 31, 2012.
U.S. District Judge Kimba Wood handed down the sentences on Wednesday.
Ghavami, who was found guilty on two counts of conspiracy to commit wire fraud and one count of substantive wire fraud, will serve 18 months in prison and pay a $1 million criminal fine.
Heinz was found guilty on three counts of conspiracy to commit wire fraud and two counts of substantive wire fraud. He faces 27 months in prison and a $400,000 criminal fine.
Welty must serve 16 months in prison and pay a $300,000 criminal fine for three counts of conspiracy to commit wire fraud.
The Justice Department says the trio are part of an ongoing municipal bonds investigation that has involved charges against 20 others, 19 of whom have been convicted or pleaded guilty. The last awaits trial.
One company, Rubin/Chambers, Dunhill Insurance Services, has also pleaded guilty.