Municipal-Bond Bank Ex-UBS is arrested in New York, the wire fraud charge

A former co-head of the municipal derivatives at UBS AG faces one count of fraud involving a kickback of $ 100,000 for the investment management agreement with a U.S. state to another bank.

Peter Ghavami, a Belgian national living in Moscow, was arrested on December 1 after arriving at John F. Kennedy International Airport, U.S. Department of Justice said yesterday. Ghavami, with UBS from 1999 to 2007, is the second employee former chairman of Zurich-based bank to be caught in the federal investigation of pricing investment contracts governments buy with money raised from the bond market $ 2800000000000 city.

"Pernicious fraud schemes such as that alleged in this complaint undermine public confidence and trust in municipal bonds and derivatives markets," said Christine Varney, head of the division of competition, yesterday a statement on its website.

Eight former bankers and financial advisers, including former employees of UBS, JPMorgan Chase & Co. and Bank of America Corp., have pleaded guilty to fraud against the taxpayers for conspiring with the brokers to pay state and local governments under market rates on the investments purchased with bond proceeds.

Kelly Smith, a spokeswoman for UBS in New York, declined comment.

Ghavami's arrest is the second action this week to leave the four-year investigation. On 30 November, the former JP Morgan banker James L. Hertz admitted to participating in bid-rigging conspiracy and fraud that delivers benefits to Wall Street at taxpayer expense.

CDR Financial case

In the case against a company, CDR Financial Products Inc. of Los Angeles, prosecutors say included more than 200 offers of participation of about 160 state agencies, local governments and nonprofit organizations from California to Texas.

CDR Three former employees pleaded guilty to charges this year and agreed to cooperate with investigators. Three others are fighting the charges. CDR faces a September trial on charges of conspiracy related, according to the Department of Justice.

CDR faces a fine of up to $ 100 million, if convicted, the government has said. In a statement posted on its website in October 2009, the company said the allegations are "unfounded and, in fact, a fiction based on the total lack of understanding of municipal reinvestment market."

The criminal investigation centers on investment agreements that municipalities come from the money raised by selling bonds. The surety of investment called a yield them until the money is needed for schools, roads or other public works. Treasury Department USA encourages competitive bidding to ensure that localities do market rates.

Inside Information

Prosecutors have said that bankers are favored insiders who commissioned brokers bidding for contracts to share the market. In some cases, bankers admitted paying bribes to officials.

The case against Ghavami, also known as Peter Ghavamilahidji according to the Justice Department's complaint, was enhanced by the testimony of a former colleague and co-operating witnesses CDR and Charlotte, financial North Carolina-based company. The complaint did not identify the company.

Bank of America, based in Charlotte, has been helping the Justice Department investigation since 2007 in exchange for leniency. In September, Douglas Lee Campbell, a former executive of municipal derivatives with the bank, pleaded guilty and agreed to cooperate. In May, Mark Zaino, who worked for UBS's municipal bond and derivatives trading desk from 2001 to 2006, pleaded guilty to participating in a conspiracy to rig bids for contracts.

Fixed Agreement

Ghavami worked as an agent in 2001 to an unidentified been seeking an investment contract bond proceeds, the Justice Department said in a previously sealed complaint, dated 16 September. While the agreement should be awarded to the lowest cost bidder, Ghavami arrangements for the deal to go to the unidentified Charlotte, Bank of North Carolina in exchange for a bribe to pay his employer in 2002, according to the complaint.

Ghavami had a license, falsely claiming that the investment contract price is determined through an arm's-length transaction, delivered to the issuer of the State in November 2001, the complaint said. He said the certificate also stated that the employer did not expect Ghavami to pay the broker or agent of an offer to contract-related fee.

Seeking $ 100,000

After the bank won the deal, Ghavami asked employees CDR unidentified banker to call and remind her to pay the kickback. In February 2002, the employer Ghavami received the $ 100,000, which was "disguised as a fee" back cover ", the government said. earlier writings show that bankers hid false bribes as fees related derivative transactions.

In his appearance yesterday, Ghavami not introduced an exception and argues that, according to Alisa Finelli, a spokeswoman for the Department of Justice. He said that we must return to court Jan. 3.

James A. Mitchell, an attorney with Stillman, Friedman & Shechtman and representing Ghavami, did not immediately return a call to his office after regular business hours seeking comment.

To date, 15 former bankers and directors have been charged in the investigation. Court records obtained by us also identify co-conspirators in the banks as Citigroup Inc., Lehman Brothers Holdings Inc. and Wachovia Corp., which have not been charged.

SEC Notice

UBS received a notice from the U.S. Securities and Exchange Commission on February 4, 2008, the agency was considering suing the bank in connection with the offering of financial instruments associated with municipal bonds. UBS is cooperating with the Department of Justice and the SEC, according to the latest quarterly report of the bank.

After leaving UBS in 2007, Ghavami worked for Lehman in London as head of Russia's capital markets. In September 2009, he became head of global markets for Troika Dialog, a private investment bank based in Moscow.

In a statement, Troika Dialog, said he was aware the Justice Department charges against Ghavami.

"These allegations relate to the time period of several years before Peter joined Troika Dialog", the bank said in an emailed statement.

Ghavami faces up to 20 years imprisonment and a fine of $ 250,000, if convicted, according to the Department of Justice.