SEC Charges Wachovia with Fraudulent Bid Rigging in Municipal Bond Proceeds

The SEC charged Wachovia Bank N.A. with fraudulently engaging in secret arrangements with bidding agents to improperly win business from municipalities and guarantee itself profits in the reinvestment of municipal bond proceeds. Over a period of eight years, the SEC alleges that Wachovia fraudulently rigged at least 58 municipal bond reinvestment transactions, generating millions of dollars in illicit gains.

“Wachovia won bids by playing an elaborate game of ‘you scratch my back and I’ll scratch yours,’ rather than engaging in legitimate competition to win municipalities’ business,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

Wachovia agreed to settle the charges by paying $46 million to the SEC, which will be returned to affected municipalities or conduit borrowers. The settlements arise out of long-standing parallel investigations into widespread corruption in the municipal securities reinvestment industry.

SEC Charges Wachovia with Fraudulent Bid Rigging in Municipal Bond Proceeds