In re GE Funding Capital Market Services, Inc. (Municipal Bond Derivatives)
Starting in 2008, the states investigated the municipal bond derivatives market, where tax exempt entities like governments and nonprofit organizations issue bonds and reinvest the proceeds until the funds are needed or enter into contracts to hedge interest rate risk on bonds. GE Funding is the fifth financial institution to settle with the multistate working group in the ongoing municipal bond derivatives investigation following Bank of America, UBS AG, JP Morgan and Wachovia.
The investigation revealed conspiratorial and fraudulent conduct involving individuals at financial institutions and certain brokers with whom they had working relationships. The states’ investigation developed evidence that certain traders at GE Funding, in concert with certain brokers, engaged in conduct that allowed the broker to determine in advance that GE Funding would win a bid for a guaranteed investment contract. The conduct allowed GE Funding to submit a “last look’’ bid, while the broker arranged for other financial institutions to submit purposely non-winning courtesy bids. Because of the “last look,” on many occasions GE Funding was able to lower its bid to the issuer and still win the transaction.The misconduct led state and local entities, such as municipalities, counties, school districts and other government agencies, as well as nonprofits, to enter into municipal derivatives contracts on less advantageous terms than they would have otherwise.
U.S. and Plaintiff States v. AT&T, No. 11-01560 (D.D.C, 2011)
AT&T sought to acquire T-Mobile. The transaction would have combined two of the only four wireless carriers with nationwide networks. US DOJ and six states filed suite to block the merger. The parties abandoned the merger three months later.
In the Matter of McSam Management (July 5, 2011)
State reached a settlement with two hotel
owners and a hotel management company to end their practice of “call-arounds.” According to the state, call-arounds allowed competing
hotels in close proximity to exchange sensitive competitor information at least once a day about occupancy and current room rates that may be used to fix rates for hotel rooms. Owners of Holiday Inn Express and Homewood Suites in two Connecticut cities agreed to stop sharing information and to pay $50,000 civil fine.
In re J.P. Morgan Chase (Municipal Bond Derivatives)
Starting in 2008, the states investigated the municipal bond derivatives market, where tax exempt entities like governments and nonprofit organizations issue bonds and reinvest the proceeds until the funds are needed or enter into contracts to hedge interest rate risk on bonds.
The investigation revealed conspiratorial and fraudulent conduct involving individuals at JPMC, other financial institutions, and certain brokers with whom they had working relationships. The states alleged that certain JPMC employees and their counterparts at other institutions rigged bids, submitted noncompetitive courtesy bids and fraudulent certificates of arms-length bidding to government agencies. The misconduct led state and local entities, such as municipalities, counties, school districts and other government agencies, as well as nonprofits, to enter into municipal derivatives contracts on less advantageous terms than they would have otherwise. The $66.5 million multistate settlement is one component of a coordinated settlements (totaling $92 million) between JPMC and the U.S. Department of Justice’s Antitrust Division, the Securities and Exchange Commission (SEC), the Internal Revenue Service, the Office of the Comptroller of the Currency (OCC), as well as the states.
Connecticut v. Galante, No. X04-HHD-CV-09-5033841-S (Ct. Super. Ct. Hartford, April 11, 2011)
In 2009, Connecticut sued James E. Galante, former owner of waste disposal companies operating in the Dan bury area, for alleged violations of the Connecticut Unfair Trade Practices Act and the Connecticut Antitrust Act. The lawsuit alleged that in 2002 and 2004, Galante ordered his employees at AWD and Thomas to raise prices by 10 percent for certain commercial customers under the false representation that they were mandatory increases for disposal-site costs. The lawsuit also alleged two incidents of bid-rigging by American Disposal Services of Connecticut, another Galante-owned company, in attempts to secure waste-hauling contracts. Under terms of the settlement, the state received $600,000 to be distributed to an estimated 500 commercial customers of Galante’s former companies: Automated Waste Disposal, Inc. and Thomas Refuse Services Inc.The settlement was timed to the federal government’s sale of these and other companies forfeited by Galante as part of his 2008 guilty plea to federal racketeering conspiracy, conspiracy to defraud the Internal Revenue Service and wire-fraud conspiracy for his role in orchestrating a scheme to drive up trash-removal prices.
Hawaii v. ACE Holdings, Inc., No. 07-1-2015-10 (Cir. Ct. 1st Cir. Hawaii, Oct. 25, 2007)
Consent decrees filed by states in state court required $4.5 million payment and conduct relief to remedy alleged bid-rigging and false insurance quotes, as well as payment of secret “contingent commissions” to brokers.
Federal Trade Commission and State of Georgia v. Phoebe Putney Health System, Inc.,No. 1:11-cv-00058-WLS (M.D. Ga. Apr. 20, 2011)
Georgia Attorney General’s Office filed a joint complaint with the FTC seeking to enjoin any transaction involving Phoebe Putney, the Hospital Authority of Albany-Dougherty County or Palmyra Park Hospital under which Phoebe Putney would acquire control of Palmyra Park Hospital’s operations, until the conclusion of the FTC’s administrative proceeding and any subsequent appeals.
The complaint alleges that the transaction as proposed would violate federal law by eliminating the vigorous competition that currently exists between Phoebe Putney and Palmyra Park Hospital in Albany and the surrounding six-county area. The complaint also alleges that Phoebe Putney has used the Hospital Authority to cloak private, anticompetitive activity in governmental guise in the hopes that it would exempt the acquisition from federal antitrust law. Court granted TRO, case filed under seal.
U.S. and Texas v. United Regional Healthcare System, No. 7:11-cv-00030 (N.D.Tex. Feb. 25, 2011)
USDOJ and Texas reached a settlement with United Regional Health Care System of Wichita Falls, Texas, that prohibits it from entering into contracts that improperly inhibit commercial health insurers from contracting with United Regional’s competitors. Plaintiffs alleged that United Regional unlawfully used these contracts to maintain its monopoly for hospital services in violation of Section 2 of the Sherman Act.
Pennsylvania v. Twin Ponds, Inc., No. 2010-CV-11677 (Ct. Comm. Pleas, Dauphin Cty Penn. Sept. 10, 2010)
Two ice skating rinks operated in the Harrisburg Pennsylvania area. The owners entered into an agreement under which one ice house would melt its ice and provide only indoor roller skating and indoor soccer services. State filed suit, charging market allocation and violation of the prohibition against monopolies. Settlement included permanent injunction voiding market allocation agreement and restrictive covenant that prevented property from being used as a skating rink. Defendants paid $65,000, to be used as a settlement fund to support youth hockey in Dauphin County and to reimburse the state for its costs.
People of the State of California v. Bioelements, Inc.
State sued and entered into settlement with Bioelements, a maker of “cosmeceuticals” for skin care. Bioelements had entered into agreements with retailers fixing the prices at which Bioelements products could be sold on the Internet. Settlement enjoined the conduct and Bioelements paid $51,000 in civil penalties and attorneys fees.