UBS BANK COMMITS 3.7 TRILLION DOLLAR FRAUD

FROM THE - JOURNALS of Monte Friesner – Criminal & Intelligence Analyst and Consulaire for WANTED SA

U.S. seeks record prison for ex-UBS bankers over Muni Bid-Rigging
By Jonathan Stempel

(Reuters) - U.S. prosecutors are seeking record prison terms, including one approaching 20 years, for three former UBS AG bankers who were convicted of conspiring to deceive U.S. cities and towns by scheming to rig bids to invest municipal bond proceeds.

The government said Gary Heinz deserves the biggest punishment, and should spend at least 19-1/2 years in prison.

It also said former global head of commodities Peter Ghavami should serve at least 17-1/2 years, while defendant Michael Welty deserves at least 11-1/4 years. All three worked on the same municipal securities desk at UBS, the Swiss bank.

At least 19 people have been convicted or pleaded guilty in the government's probe of the $3.7 trillion U.S. municipal bond market, focusing on the rigging of returns paid on the short-term investment made with bond proceeds.

The probe has touched some of the world's biggest banks. No defendant has yet received a prison sentence longer than four years, according to the U.S. Department of Justice.

"That is an outrageous request," Heinz's lawyer Marc Mukasey said in a phone interview on Thursday, referring to the proposed sentence for his client. "This is a fraud case, not a serial murder."

Prosecutors made the requests in a Wednesday night filing in Manhattan federal court. They reflect the government's aggressive approach toward rooting out fraud in municipal bonds.

In seeking record sentences, prosecutors said the defendants "embraced a culture of corruption" through activities designed to boost profit on their UBS desk, and consequently their own.

"Simply put, defendants' crimes were the product of greed and arrogance," the government said.

It will be up to U.S. District Judge Kimba Wood to determine the sentences. Sentencing hearings for Ghavami, Heinz and Welty are set for May 22 and May 23.

"We're disappointed in the tone of the government's memo, but we'll do our talking in court," Ghavami's lawyer Charles Stillman said in a phone interview.

Welty's lawyer Gregory Poe did not immediately respond to requests for a comment.

DEFENDANTS DENIED WRONGDOING

A federal jury convicted Ghavami, Heinz and Welty last August of conspiring to defraud municipal bond issuers, and also convicted Ghavami and Heinz of wire fraud.

Prosecutors said the bankers took part in fraud conspiracies from March 2001 to November 2006, including in 2001 and 2002 when bids were rigged for guaranteed investment contracts that municipalities use to park bond sale proceeds.

Such activity deprived municipalities of competitive interest rates for investing bond proceeds intended to refinance debt and for various public works projects, and cost the U.S. Treasury millions of dollars, the government said.

The defendants denied wrongdoing and accused government witnesses of lying.

In October, former General Electric Co executive Steven Goldberg was handed a four-year term after he was found guilty of conspiring to rig bids. He was sentenced by U.S. District Judge Harold Baer.

Goldberg's co-defendants Dominick Carollo and Peter Grimm, who also worked at GE, each received three years in prison. Prosecutors had sought double-digit sentences for all three.

The case is U.S. v. Ghavami et al, U.S. District Court, Southern District of New York, No. 10-cr-01217.

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