Bank of America settles with states, feds in fraud probe

Charlotte ObserverDecember 7, 2010 

Bank of America has agreed to a sweeping $137 million settlement with state and federal authorities to resolve its role in an alleged bid-rigging scheme that has been under investigation since 2006.

The settlement is the end result of a February 2007 leniency agreement the Charlotte bank reached with the Department of Justice, which spared it from criminal investigation in return for its cooperation. Bank of America is paying restitution but no fines, as authorities continue to investigate other major financial institutions.

"The regulatory agencies recognized that the Bank stepped forward and reported evidence of improper bidding practices in the industry, cooperated extensively and assisted investigations by the Justice Department, the Securities and Exchange Commission and other law enforcement and regulatory entities," Bank of America said in a statement. "The Bank also took appropriate personnel actions and other measures to ensure that these or similar practices would not occur again."

The settlement resolves allegations that the Charlotte bank defrauded state agencies, cities and towns, and non-profits that bought a type of investment called municipal bond derivatives. The practices occurred between 1998 and 2003.

The bank will pay $25 million to the IRS, plus another $107 million worked out with other agencies and $4.5 million to attorneys general for costs related to the investigation. Other agencies involved in the settlement were the SEC, the Office of the Comptroller of the Currency and the Federal Reserve, the attorney's general office said.

The bank said it was the first and only bank to self-report to the Justice Department. It has taken undertaken voluntary remediation efforts and continues to cooperate with agencies investigating practices at various companies involved in the practices. Former Merrill Lynch & Co. executives now run the municipal derivatives operation at Bank of America.

Other states in the settlement include Alabama, California, Connecticut, Florida, Illinois, Kansas, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, South Carolina and Texas.

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