U.S. Inquiry on Bonds at Big Bank

Bank of America said yesterday that it was cooperating with a Justice Department investigation into bidding practices in the municipal bond business in exchange for leniency.

The agreement with the bank may be a significant breakthrough for government investigators who have been looking at how the proceeds of bonds issued by cities, school districts and other municipal authorities are invested between the time the money is raised and when it is spent on projects like new water systems and school gymnasiums.

Investigators are examining whether there was collusion among some financial institutions in bidding to handle the bond revenue during those interim periods.

Last November, the Justice Department issued subpoenas and raided the offices of several firms that served as go-betweens for municipalities and large financial institutions.

The investigation is the biggest in municipal finance since the 1990s, when the Securities and Exchange Commission accused some Wall Street firms of "yield burning" -- or profiting by overcharging state and local government agencies in debt refinancings. The current investigation is unusual because it appears to involve possible criminal charges.

Bank of America said the Justice Department had agreed not to bring criminal charges against the bank because it was the first institution to volunteer information before the subpoenas were issued. Furthermore, the agreement limits the civil penalties that prosecutors can pursue against the bank to actual damages, rather than the treble damages it can pursue against others.

The deal, which the bank said would not be available to other financial institutions, is contingent on continued cooperation by Bank of America.

"If a company has participated in industrywide practices, its cooperation can prove invaluable," said Kathleen F. Brickey, a law professor at Washington University in St. Louis who specializes in white-collar crime. as prosecutors investigate other companies. "This will be unwelcome news for others" in the industry. ...

•	U.S. Inquiry on Bonds at Big Bank The New York Times, Saturday, Feb. 10, 2007 Byline: Vikas Bajaj

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