Attorney General Coakley Sues Investment Firm Tradition North America, Inc. for Bid-Rigging
AG Alleges Company Deceived the Commonwealth, Rigged Prices, and Made False Statements
These GIC investments, which are used for temporarily re-investing the proceeds of municipal bond issuances, pay a set interest rate for a specific period of time. Similar to a Certificate of Deposit (CD), these products provide a relatively safe investment environment for the public entity, while also providing reasonable interest. Tradition conducted the bidding process among the banks that sought to sell these GICs to the Commonwealth, and certified to the State that the bidding process was competitive and that the winning bid would be the GIC that provided the highest yield.
"We believe Tradition's conduct here is very troubling," said Attorney General Martha Coakley "We allege in our lawsuit that Tradition lied to Commonwealth representatives and orchestrated a complicated bid rigging process, complete with code words and false names to hide the scheme. Tradition needs to be held accountable and we will be aggressively pursuing this matter."
The complaint alleges that Tradition created a rigged and corrupt bidding process. As outlined in the Attorney General's lawsuit, filed in Suffolk Superior Court, the investment giant told favored providers what other banks were bidding and also told the favored providers exactly what to bid in order to win the business. This resulted in bids that offered Massachusetts less interest than it would have gotten if the bidding process had really been competitive. By fixing the bids, Tradition ensured that these favored providers would get business from the Commonwealth while also shortchanging Massachusetts.
Tradition allegedly told favored providers who had already indicated that they intended to offer certain high interest rates that these providers should offer less money to the Commonwealth. For example, Trinity Plus Funding Company LLC had indicated that it intended in one bidding competition to submit an aggressively high interest rate in order to win the Commonwealth's business. A Tradition agent told the company specifically to bid a lower interest rate. This Tradition agent has at this point pled guilty to Wire Fraud and Conspiracy in Federal Court.
The complaint alleges that Tradition repeatedly deceived the Commonwealth, and provided false certifications regarding the bidding process. Indeed, Tradition signed numerous false statements indicating, among other things, that all potential providers had an equal opportunity to bid and that the winning bid was the highest yielding bona fide bid determined net of any broker's fees. The complaint alleges that those certifications were false because the bidding process was, in fact, rigged.
In order to remedy Tradition's conduct, the Commonwealth is seeking statutory penalties under the False Claims Act and the Consumer Protection Act, injunctive relief to prevent Tradition from engaging in similar conduct, and damages and restitution.
This case is being handled jointly by staff from Attorney General Martha Coakley's Insurance & Financial Services Division and Antitrust Division. Assistant Attorney General Aaron Lamb of the Insurance and Financial Services Division, Assistant Attorney General Mary Freeley of the Antitrust Division, Legal Analyst Melissa Swindel and paralegal Brian Daly of the Insurance and Financial Services Division and Insurance and Financial Services Division Chief Glenn Kaplan and Antitrust Division Chief, William Matlack are handling this matter.