WASHINGTON — A unit of JPMorgan Chase & Co. will pay $228 million to settle civil fraud charges that it rigged dozens of bidding competitions to win business from cities and counties.
J.P. Morgan Securities LLC made at least 93 secret deals with companies that handled the bidding processes in 31 states, according to the Justice Department and Securities and Exchange Commission. Those deals allowed the bank to peek at competitors’ offers.
Banks help municipalities invest the money they raise from bond offerings so that they can earn interest before paying for projects. They compete by submitting to state and local governments the best yield they can offer.
The alleged bid-rigging deprived governments of a true competitive process that would produce the best returns on their investments, Assistant Attorney General Christine Varney said in a statement.
JPMorgan’s settlement covers complaints brought by the SEC, the Internal Revenue Service, bank regulators and 25 state attorneys general.
JPMorgan agreed to co-operate with the Justice Department’s investigation into the municipal bid-rigging issue in exchange for not being prosecuted, the agency said. Under the agreement, JPMorgan also must pay restitution to victims of the alleged fraud.
The company admitted and accepted responsibility for the illegal conduct. It blamed it on former employees of a division that has since been shut down. The company said it “is pleased to have resolved this matter with its regulators.”
It was the second major federal settlement for the bank in the past month. JPMorgan settled civil fraud charges with the SEC last month. It agreed to pay $154 million for allegedly misleading buyers of complex mortgage investments as the housing market collapsed.
One former executive of the bank’s securities unit, James Hertz, pleaded guilty in December to criminal charges related to the bid-rigging issue. He also is co-operating with authorities.
In all, the Justice probe has resulted in criminal charges against 18 former executives of financial services companies and one corporation. Including Hertz, nine of the executives have pleaded guilty.
Bank of America and UBS have agreed to settlements based on similar municipal bid-rigging charges brought by federal and state authorities. Bank of America Corp. agreed in December to pay more than $137 million. UBS AG agreed in May to pay more than $160 million.
JPMorgan shares rose 95 cents, or 2 per cent, to $41.51 in early-afternoon trading Thursday.