A screen shot from CDR’s Web site.
Indictment details a phone call ‘between New Mexico and New York’ that involved alleged bid-rigging related to ‘the award and performance of an investment agreement for a state housing agency’
CDR Financial Products, the company that was at the center of the scandal that cost Gov. Bill Richardson the U.S. commerce secretary post, was indicted along with its founder and two other employees today as part of a national probe into bid rigging in the municipal bond market.
The 39-page, nine-count indictment charges the company, founder David Rubin and two other CDR employees with “conspiring to rig bidding on investment contracts sold to local governments” in several states, Bloomberg is reporting.
The indictment raises more questions than it answers in New Mexico, considering that it comes two months after Richardson and former staff members were told they wouldn’t be charged in a separate probe into CDR’s dealings with the Richardson administration.
One of the allegations in the indictment mentions New Mexico, stating that, “on or about May 20, 2004, the day of the bid, during an interstate telephone call between New Mexico and New York,” an unidentified person “checked with a co-conspirator at CDR to make sure that a bid rate suggested by Rubin would be a winning bid and then submitted a bid in accordance with Rubin’s suggestion.”
That’s in relation to “the award and performance of an investment agreement for a state housing agency,” the indictment states, but it doesn’t name the housing agency or even the state in which it’s located.
Though it may not be related to today’s indictments, it’s noteworthy that the date of that New Mexico-New York phone call roughly coincides with CDR’s attempt to win a contract from the New Mexico Finance Authority (NMFA) related to the GRIPgate scandal.
On June 18, 2004, Rubin gave $75,000 to a political action committee started by Richardson, according to the Albuquerque Journal. Five days later, staff recommended that CDR be given a sole-source escrow services contract. The NMFA awarded the contract on June 30 of that year.
A month later, CDR was paid $443,265 for handling that escrow account.
CDR had at least one other contract in New Mexico. It underwrote $27 million in bonds the scandal-plagued Region III Housing Authority sold to a French bank in 2003.
The governor’s office did not immediately respond to a request for comment on today’s indictments.
More details
Here are more details from Bloomberg:
“The indictment in U.S. District Court in New York alleges that CDR and its employees conspired to fix prices on investment contracts that local governments buy with the proceeds of municipal bonds. CDR managed the bidding process for the investments on behalf of local governments.
“The indictment is the first to result from a more than three-year investigation of the U.S. municipal bond market. A conspiracy to fix prices on the investments would have cost taxpayers by giving them lower returns than they would receive in a competitive auction. More than a dozen banks, brokers and insurers have been subpoenaed under the investigation.”
And this from The Associated Press:
“Prosecutors said the company secretly manipulated the bidding process to enrich themselves and the bidding companies at the expense of the municipalities, the IRS or both.
“Under the scheme, CDR would arrange in advance which company would win a particular bid for bond business and arrange kickbacks to CDR in the form of inflated fees, authorities said. If convicted of the most serious charge against them, the three men face a maximum prison sentence of 20 years.
“The company could face a maximum fine of $100 million for the bid-rigging charge.”
A spokesman for CDR told Bloomberg his firm hadn’t fully reviewed the complaint but rejected the allegations.
“The government is alleging a certain kind of conspiracy that is just baseless,” Allan Ripp was quoted as saying. “CDR sternly asserts these charges are wholly without merit.”
The GRIPgate scandal
In August, the U.S. attorney for New Mexico confirmed that Richardson and others wouldn’t face charges following a yearlong investigation into allegations of pay to play related to a lucrative state contract given to CDR.
CDR was paid to advise the NMFA on interest-rate swaps and restructuring escrow funds for $1.6 billion in bonds related to the transportation project dubbed GRIP, or Governor Richardson’s Investment Partnership. The allegation was that CDR received the state contract – which paid the company almost $1.5 million – in exchange for $110,000 in contributions to two Richardson political committees and his 2006 gubernatorial re-election campaign. That included the June 2004 contribution of $75,000.
That probe led to political hard times for Richardson, who withdrew his nomination to be President Barack Obama’s commerce secretary on Jan. 4.
In confirming in a letter to attorneys for Richardson and others who were under investigation that the probe was being closed, U.S. Attorney Greg Fouratt wrote that his office’s investigation found that “pressure from the governor’s office resulted in the corruption of the procurement process” and said that the letter “should not be interpreted as exoneration of any party’s conduct in that matter.”
Fouratt’s letter also stated that the decision to drop the case in August “shall not preclude the United States or the grand jury from reinstituting such an investigation without notification if… circumstances warrant …”
The indictment
Here’s the indictment. You’ll find the mention of New Mexico on Page 27.
Update, 7:15 p.m.
State GOP Chairman Harvey Yates Jr. said in a prepared statement that it’s “disturbing that the same firm which was at the center of a federal probe here in New Mexico is again facing such serious charges.”
“It is also unfortunate that these developments seem to substantiate the sentiment that U.S. Attorney General Eric Holder decided prematurely to quash the investigation concerning alleged pay-to-play activities involving the Richardson administration and CDR,” Yates said. “The question as to whether this was done as a matter of justice or whether this decision was politically motivated remains unresolved in the minds of many New Mexicans.”
“And we renew our call for Mr. Holder to provide transparent and honest answers concerning this matter,” Yates said. “He should start by releasing the FBI file covering the FBI’s investigation into CDR’s activities in New Mexico.”
The New Mexico Independent’s Trip Jennings contributed to this report. This article has been updated for clarity.