The Work

July 8, 2011 12:24 PM

JPMorgan Reaches $211 Million Settlement in State and Federal Muni Bond Bid-Rigging Probe

Posted by Nate Raymond

From The Litigation Daily

The continuing probe by federal and state enforcement officials into bid-rigging in the municipal bond market yielded yet another giant settlement on Thursday, when JPMorgan Chase agreed to pay $211 million to resolve allegations that it meddled in at least 100 deals. But plaintiffs lawyers in related civil antitrust litigation who raised objections to similar settlements with Bank of America and UBS are already crying foul over the deal.

Wilmer Cutler Pickering Hale and Dorr advised JPMorgan on Thursday's settlements with the U.S. Department of Justice, the Securities and Exchange Commission, various state attorneys general, and other federal agencies. JPMorgan said $129.7 million of the settlements will be distributed to municipalities and other issuers. (Here are the settlement documents for Justice SEC, and state AG deals. While the Justice Department said the settlements totaled $228 million, a JPMorgan spokeswoman said the sum "double counts $17 million in funds being distributed by various state AGs and the SEC and [the Office of the Comptroller of Currency].")

"By entering into illegal agreements to rig bids on certain investment contracts, JPMorgan and its former executives deprived municipalities of the competitive process to which they were entitled," Christine Varney, Justice's outgoing antitrust division chief, said in a statement.

JPMorgan counsel William McLucas of Wilmer Cutler did not return a call for comment. JPMorgan in a statement said it "assisted the government agencies in their investigations and is pleased to have resolved this matter with its regulators."

JPMorgan is the third bank to cut a deal in the long-running municipal bond investigation, which has resulted in charges against 18 individuals and nine guilty pleas. UBS, with counsel from Paul, Weiss, Rifkind, Wharton & Garrison, settled for $160.3 million in May. Before that, Bank of America, represented by King & Spalding, cut a $137 million deal.

The portion of those settlements with state attorneys general have become a point of contention in a related federal multidistrict litigation in Manhattan, however. As we've previously reported, class counsel at Susman Godfrey; Boies, Schiller & Flexner; and Hausfeld have raised concerns that the deals with UBS and Bank of America sidelined class claims in the MDL and undermined the court's authority. Manhattan federal district court judge Victor Marrero in March denied the plaintiffs lawyers' request to enjoin opt-in provisions in the BofA deal but ruled he would need to approve any settlement notices that go out.

Class counsel are still sparring with the state AGs over the Bank of America notices. The AGs in a June 21 brief accused the plaintiffs lawyers of "subordinating the interests of eligible governmental entities and not-for-profit organizations to their own financial interests" through their seven-month effort to delay implementation of the settlement.

A $65.5 million portion of Thursday's settlement with JPMorgan, which the state AGs say will go toward restitution already looks like it could get similarly bogged down. Michael Hausfeld of Hausfeld LLP told us he planned to bring the settlement to the attention of Manhattan federal district court judge Victor Marrero. "We'll be advising the court that this settlement suffers from some of the same deficiencies as the UBS and Bank of America settlements," he said.

A spokeswoman for the New York attorney general's office declined to comment. Thomas Rice of Simpson Thacher & Bartlett, who represents JPMorgan in the class action litigation, did not return a call seeking comment.

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