Pennsylvania is set to receive approximately $11.5 million in restitution as part of a multi-state bid-rigging case involving major financial institutions. These large-scale companies marketed and sold municipal derivative investments, which are primarily used by government agencies and non-profit groups to reinvest the proceeds of tax-exempt bonds until funds are needed.
These financial companies were found to be keeping money from state agencies, municipalities, and non-profit groups who had invested funds for major projects. While the victims in the situation did not lose money, they were not awarded the full amount owed to them in terms of interest rates, which ultimately benefited the major institutions.
Nils Frederiksen, Press Secretary for the State Attorney General, said those responsible are facing serious consequences in addition to financial restitution.
"There have been criminal charges on a federal level against some individuals, and there have been a series of multi-million dollar settlements involving the banks in order to pay back the money that these local governments and school districts and nonprofit groups should have earned on their investment," Frederiksen said.
The five major banking companies involved that reached settlements are:
- Bank of America ($67 million)
- JP Morgan Chase ($92 million)
- Wachovia ($58.75 million)
- Union Bank of Switzerland ($90.8 million)
- GE Funding Capitol Market Services ($34.25 million)
The Pennsylvania Turnpike Commission will receive a refund of $377,388. In western Pennsylvania several agencies, groups, and entities in Allegheny, Armstrong, Beaver, Butler, Fayette, Washington, and Westmoreland Counties will receive payments including the Allegheny County Airport Authority; the Pittsburgh Allegheny County Sports and Exhibition Authority; Armstrong, Elizabeth Forward, Hempfield Area, Mars Area and Uniontown school districts; Butler County Community College; and Chippewa Township.
Frederiksen said many of the groups that were victimized were likely in the midst of finding funding for major projects. "They often don't need all of the money right away, so typically, a portion of that money is invested to earn extra interest to help reduce the overall cost of the project and the overall cost of the bond issue," Frederiksen said.
He said some organizations were skeptical of the case at first, but were pleased to be eligible for restitution. "Given this day and age with concerns about scams and fraud, we wanted to make the local governments aware that this was going on, because it's not every day that somebody comes knocking and says that you're owed a couple hundred dollars," Frederiksen said.