By: James W. Kraus
On August 31, 2012, a jury convicted three former financial services executives for wire fraud and conspiracy to commit wire fraud in relation to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts. According to the Department of Justice, Peter Ghavami, Gary Heinz and Michael Welty participated in separate fraud conspiracies and schemes with various financial institutions and with a broker, at various time periods from as early as March 2001 until at least November of 2006.
The financial institutions offered a type of contract to state, county and local governments and agencies, and not-for-profit entities, throughout the United States, known as “investment agreements.” Public entities typically hire a broker to assist them in investing their money and to conduct a competitive bidding process to determine a winning provider. According to DOJ, the public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects.
The jury found that Ghavami, Heinz and Welty, with their provider and broker co-conspirators, corrupted the bidding process in order to increase the number and profitability of the agreements awarded to UBS. At other times, while acting as brokers, Ghavami, Heinz and Welty and their co-conspirators, arranged for UBS to receive kick-backs in exchange for manipulating the bidding process and steering investment agreements to certain providers. The result was to deprive the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities to refinance outstanding debt and for various public works projects.
The government presented evidence at trial that these actions cost municipalities around the country and the U.S. Treasury millions of dollars. Among the issuers and not-for-profit entities whose agreements or contracts were subject to the defendants’ schemes were the Commonwealth of Massachusetts, the New Mexico Educational Assistance Foundation, the Tobacco Settlement Financing Corporation of Rhode Island and the RWJ Healthcare Corp. at Hamilton.
The DOJ announced that a total of 20 individuals have been charged as a result of the Department’s ongoing municipal bonds investigation. Of those 20, a total of 19 individuals have been convicted or pleaded guilty, and one awaits trial. In addition, one company has pleaded guilty.
Pietragallo partners John Schwab and Jim Kraus will be discussing topics related to federal criminal practice in a four-hour symposium hosted by the Allegheny County Bar Association on Friday, April 24th, 2020. Do you have your first criminal case in Federal Court or do you practice criminal defense and need a refresher on the specifics… Read more »Read More
PITTSBURGH and PHILADELPHIA, PA (May 10, 2019) – Twenty Pietragallo Gordon Alfano Bosick & Raspanti, LLP attorneys were named to the 2019 Pennsylvania Super Lawyers and Rising Stars list, including founding partner William Pietragallo, II. These designations are awarded to lawyers who received the highest point totals in the Pennsylvania Super Lawyers2019 nomination, research, and review process, an honor reserved… Read more »Read More
On Tuesday, July 14th, Pietragallo Partner Pamela Coyle Brecht will host a panel presentation to all members of the Qui Tam section of the Federal Bar Association (FBA). The panel will include compliance counsel, defense counsel, and relator’s counsel who will discuss several areas related to the False Claims Act under the program title, “How… Read more »Read More
Pietragallo Partner Douglas K. Rosenblum will be presenting at PBI’s upcoming program, “Intellectual Property Law Institute 2020” on Tuesday, July 28th, 2020. Mr. Rosenblum’s segment is titled, “Trials and Tribulations of Virtual Hearings, Depositions, etc. in the Age of Covid-19.” This year marks the 14th anniversary of the ‘IP Institute’ and the program will be… Read more »Read More