May 4, 2011
• Posted in

Oregon issuers will receive approximately $2 million in restitution under a global settlement

The Oregon Department of Justice today announced a settlement with UBS AG (UBS) to resolve allegations that the company engaged in illegal and anti-competitive practices related to municipal bond derivative transactions.

“The Oregon Department of Justice has no tolerance for businesses that manipulate investments involving government and not-for-profit dollars,” said Attorney General John Kroger.

Headquartered in Zurich and Basel, Switzerland, UBS is one of the world’s leading financial firms, with offices in more than 50 countries. This case arose from the market for municipal bonds, which governments and non-profits typically sell in order to finance capital projects such as mass transit, roads and schools. The proceeds typically are re-invested until the money is needed to pay for a particular phase of the project. Municipal bond derivatives are contracts that tax-exempt issuers use to reinvest these proceeds, or to hedge interest rate risk. These transactions are often awarded by a competitive bidding process or direct negotiations.

Today’s settlement is the result of an ongoing investigation conducted by a working group of states led by New York and Connecticut that looked into violations of state and federal antitrust laws, and false claims statutes in the marketing, sale and placement of municipal bond derivatives. The states entered into a settlement with Bank of America in December of 2010 involving similar allegations.

Among other things, the investigation into UBS focused on evidence suggesting that the company and other financial institutions and certain brokers rigged bids, provided false certifications and made misrepresentations on municipal bond derivative transactions and  negotiated interest rate risk management products. As a result of such wrongful conduct, competition was reduced and government and not-for-profit entities received less advantageous terms.

Under today’s settlement, UBS agrees to pay a total of $90.8 million because of its alleged anticompetitive and fraudulent conduct in the municipal bond derivative industry. $63.3 million will be used as a fund to provide restitution to governmental and not-for-profit victims. An additional payment will be made to the states as compensation for costs incurred in the investigation and fees, as well as a civil penalty. The settlement also provides that UBS will pay $20 million in restitution directly to certain other government and not-for-profit entities as part of a separate settlement with federal authorities.

Oregon issuers eligible to submit claims for restitution totaling approximately $2 million under the settlement include, but are not limited to, the City of Portland, Washington County, Lewis and Clark College, Oregon Health and Science University, Reed College and the Salem Hospital.

Other states joining Oregon in the UBS settlement include: Alabama, California, Colorado, Connecticut, District of Columbia, Florida, Idaho, Illinois, Kansas, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Tennessee and Wisconsin.

The Oregon Attorney General is charged with enforcing federal and state antitrust laws. Senior Assistant Attorney General Tim Nord handled the case for the Department of Justice.

Attorney General John Kroger leads the Oregon Department of Justice. The Department’s mission is to fight crime and fraud, protect the environment, improve child welfare, promote a positive business climate, and defend the rights of all Oregonians.


Tony Green, (503) 378-6002 |