Former UBS bankers get prison terms for muni bid-rigging

Wed Jul 24, 2013 6:46pm EDT
 
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By Bernard Vaughan

NEW YORK (Reuters) - Three former UBS AG UBSN.VX bankers were sentenced to prison on Wednesday for deceiving U.S. municipalities by rigging bids to invest municipal bond proceeds, with the longest sentence at 27 months, a fraction of what prosecutors had sought.

Gary Heinz, 40, a former bank vice president who was caught on recordings discussing the scheme, received the prison sentence of 27 months. U.S. District Judge Kimba Wood also ordered Heinz to pay a $400,000 fine.

Peter Ghavami, 45, who left UBS in 2007 as global head of commodities, was sentenced to 18 months in prison and ordered to pay a $1 million fine; and Michael Welty, 49, a former vice president, was sentenced to 16 months and ordered to pay a $300,000 fine.

"We're very pleased at the outcome and we feel that justice was done," said Charles Stillman, a lawyer for Ghavami.

Prosecutors said the bankers steered financial contracts to their friends in exchange for kickbacks and other favors between 2001 and 2006, while falsely certifying that the processes were competitive.

A federal jury convicted all three last August of conspiring to defraud municipal bond issuers, and also convicted Ghavami and Heinz of wire fraud. UBS agreed in 2011 to pay $160 million in restitution, penalties and disgorgement for the scheme.

Prosecutors had sought sentences of at least 19-1/2 years for Heinz, at least 17-1/2 years for Ghavami and at least 11-1/4 years for Welty.

Wood cut the range of potential sentences for all three in U.S. District Court in New York on Wednesday, saying that their criminal behavior was aberrational from their otherwise law-abiding lives, and because the victims have been "compensated highly" by the UBS settlement.   Continued...

 
Former UBS AG banker Peter Ghavami (C) leaves the Manhattan Federal Court in New York July 24, 2013. REUTERS/Eduardo Munoz