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Municipal Derivatives

In re: Municipal Derivatives Antitrust Litigation
MDL 1950, U.S.D.C., Southern District of New York
March 2009

The State of Mississippi and Fairfax County, Virginia, among other plaintiffs, filed a nationwide class action lawsuit against thirty seven leading banks, insurance companies, and brokers alleging widespread price-fixing and bid-rigging in the multi-billion dollar municipal derivatives industry dating back to 1992. The proposed class is represented by Hausfeld LLP and other co-lead counsel. The plaintiffs and the class they seek to represent are state, local, and municipal governments and their agencies, as well as private entities, that purchased municipal derivatives from or through any of the following defendants: AIG Financial Products Corp.; AIG SunAmerica Life Assurance Co.; GE Funding Capital Market Services, Inc.; Genworth Financial Inc.; JP Morgan Chase & Co.; Bear, Stearns & Co., Inc.; Société Générale SA; UBS AG; Lehman Brothers Inc.; Merrill Lynch & Co. Inc.; Morgan Stanley; Wachovia Bank N.A.; Natixis S.A.; Financial Security Assurance Holdings, Ltd.; Financial Security Assurance, Inc.; Financial Guaranty Insurance Company; Trinity Funding Co. LLC; Piper Jaffray & Co.; Security Capital Assurance Inc.; XL Asset Funding Company LLC; XL Life Insurance & Annuity, Inc.; National Westminster Bank plc; or Bank of America N.A.

Municipal derivatives are used to invest the proceeds of municipal bonds. Because municipal bonds commonly fund multi-year public works projects, most of their proceeds cannot be spent immediately, and must be invested to earn interest until they are ripe for use. These investment vehicles are known as municipal derivatives, an umbrella term that refers to various tax-exempt vehicles, including guaranteed investment contracts, advance refunding escrows, swaps, options, swaptions, collars, and floors.
As a result of this conspiracy, the plaintiffs and other class members were deprived of extra money they otherwise would have received from their municipal bond investments and could have spent on important public works projects such as roads, buildings, and mass transit.

The lawsuits come on the heels of a nearly two year old unprecedented investigation by the United States Department of Justice’s Antitrust Division, the Internal Revenue Service, and the Securities and Exchange Commission into industry-wide collusive practices in the two-hundred year old municipal bond industry. A grand jury investigation currently is being conducted by the Antitrust Division in the United States District Court for the Southern District of New York. Approximately thirty large commercial and investment banks, insurance companies, and brokers have been subpoenaed, and the offices of three brokers have been raided by the Federal Bureau of Investigation. Numerous employees and former employees of various defendants recently received letters notifying them that they are regarded as targets of the grand jury investigation.

The lawsuits also follow Bank of America’s conditional acceptance into the Antitrust Division’s amnesty program, in connection with which there was disclosure of information regarding the conspiracy described below and the promise to provide full and complete cooperation to the Antitrust Division and the plaintiffs and the class they seek to represent. 
 

For more information, please contact Megan E. Jones.

Practice Areas: Antitrust / Competition

 

Related News

» Hausfeld LLP Announces $4.95 Million Settlement with Morgan Stanley
» Plaintiffs in the Municipal Derivatives Antitrust Litigation "Survive and Advance" to Discovery Stage

 

Supporting Documents

» Second Consolidated Amended Class Action Complaint (PDF)
» 4/30/09 Order on Motion to Dismiss (PDF)
» 3/25/10 Order on Motion to Dismiss (PDF)
» 5/11/11 Hearing Transcript (PDF)
» Motion and Memorandum in Support of Class Plaintiffs' Motion to Seek Relief Related to Select State Attorney Generals' Proposed Notice (Redacted) (PDF)
» Class Plaintiffs' Reply Memorandum in Support of Motion to Seek Relief Related to Select State Attorney Generals' Proposed Notice (PDF)
» 6/10/11 Letter to the Court from Puerto Rico Electric Power Authority regarding State Agreement (PDF)
» 4/13/11 Letter to the Court from Class Plaintiffs regarding State Agreement with BoA (PDF)
» 5/9/11 Letter to the Court from Class Plaintiffs regarding State Agreement with UBS (PDF)
» 7/8/11 Letter to the Court from Class Plaintiffs regarding State Agreement with JP Morgan (PDF)

 

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