Alert March 20, 2009

California Joins Hunt for Bid-Riggers

The California Attorney General recently launched an investigation concerning allegations that certain banks and financial advisors conspired to overcharge California issuers for derivatives and guaranteed investment contracts related to municipal bonds. The simplest version of this practice, called "bid rigging," happens when a bank intentionally loses the bid for a derivative contract in exchange for assurances of a winning bid on a future project. Several other states, including Connecticut and Florida, are conducting similar investigations and enforcement efforts. In addition, several class action lawsuits have been filed against suspect banks, and the U.S. Department of Justice, the Securities and Exchange Commission, and the FBI are all investigating bid-rigging activities across the nation.