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Ex-UBS execs seek reversal of U.S. municipal bond-rigging convictions
May 15, 2015 / 5:12 PM / in 2 years

Ex-UBS execs seek reversal of U.S. municipal bond-rigging convictions

NEW YORK, May 15 (Reuters) - Three former UBS AG executives urged a U.S. appeals court on Friday to reverse their convictions for conspiring to deceive U.S. cities and towns by rigging bids to invest municipal bond proceeds.

Lawyers for Gary Heinz, Peter Ghavami and Michael Welty told the 2nd U.S. Circuit Court of Appeals in New York that prosecutors pursued charges too late after incorrectly reading a 1989 statute born of the savings-and-loan crisis.

The Justice Department said that under a statute covering a wire fraud that “affects a financial institution,” it could bring charges in 10 years rather than the normal five in light of settlements banks including UBS were forced to pay.

But Nathaniel Marmur, Ghavami’s lawyer, said the statute intended to cover instances where banks were victimized, not when they themselves engaged in wrongdoing.

“Someone who attempts suicide is not charged with attempted murder,” he said.

Filed in 2010, the case stems from a bid-rigging investigation involving the $3.7 trillion municipal bond market that resulted in 17 convictions and $743 million in settlements with five banks, including $160 million from UBS.

Ghavami was UBS’s global head of commodities. Heinz and Welty worked on its municipal bond reinvestment and derivatives desk.

Prosecutors said the trio steered financial contracts to others in exchange for kickbacks and favors between 2001 and 2006, while falsely certifying the processes were competitive.

A jury in 2012 found Heinz, 42, Ghavami, 47, and Welty, 51, guilty on conspiracy charges, and convicted Ghavami and Heinz of wire fraud.

U.S. District Judge Kimba Wood in Manhattan in 2013 sentenced them to prison terms of 27, 18 and 16 months for Heinz, Ghavami and Welty, respectively.

Their appeal focused on whether the banks at issue rather than third parties could engage in conduct that would expose them and employees to liability under the 1989 Financial Institutions Reform, Recovery and Enforcement Act.

Marmur said Congress had not contemplated applying the law to when banks themselves engaged in criminal conduct.

Prosecutor Daniel Haar said the defendants waived this argument at the trial level. Even if they had not, their conduct exposed the banks to criminal liability and fines.

“This is the direct result of what the defendants did here,” he said.

In 2013, the 2nd Circuit vacated on different statute-of-limitations grounds the related bid-rigging convictions of three employees of General Electric Co’s GE Capital unit, Steven Goldberg, Dominick Carollo and Peter Grimm.

The case is U.S. v. Ghavami, 2nd U.S. Circuit Court of Appeals, No. 13-3121. (Editing by Ted Botha)

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