GE Funding Capital Market Services entered into an agreement with the Department of Justice (DOJ) to resolve the company’s role in anticompetitive activity in the municipal bond investments market and agreed to pay a total of $70 million in restitution, penalties and disgorgement to federal and state agencies, the DOJ announced.

The DOJ said as part of its agreement, GE Funding admits, acknowledges and accepts responsibility for illegal, anticompetitive conduct by its former traders. According to the non-prosecution agreement, from 1999 through 2004, certain former GE Funding traders entered into unlawful agreements to manipulate the bidding process on municipal investment and related contracts, and caused GE Funding to make payments and engage in other related activities in connection with those agreements through at least 2006. These contracts were used to invest the proceeds of, or manage the risks associated with, bond issuances by municipalities and other public entities.

In a related story, Oregon Attorney General John Kroger said, the case centered on alleged illegal conduct in the municipal bond derivatives industry in which GE traders and brokers conspired to provide GE Funding with a “last look” at bids for guaranteed investment contracts. “On many occasions, due to the ‘last look’, GE Funding was able to lower its bid to the issuer and still win the transaction”, Kroger added.

Under the terms of the agreement, GE Funding agreed to pay restitution to victims of the anticompetitive conduct and to cooperate fully with the Justice Department’s Antitrust Division in its ongoing investigation into anticompetitive conduct in the municipal bond derivatives industry. To date, the ongoing investigation has resulted in criminal charges against 18 former executives of various financial services companies and one corporation. Nine of the 18 executives charged have pleaded guilty.

The SEC, the IRS and 25 state attorneys general also entered into agreements with GE Funding requiring the payment of penalties, disgorgement of profits from the illegal conduct and payment of restitution to the victims harmed by the bid manipulation by GE Funding employees, as well as other remedial measures.

As a result of GE Funding’s admission of conduct; its cooperation with the Department of Justice and other enforcement and regulatory agencies; its monetary and non-monetary commitments to the SEC, IRS and state attorneys general; and its remedial efforts to address the anticompetitive conduct, the department agreed not to prosecute GE Funding for the manipulation of bidding for municipal investment and related contracts, provided that GE Funding satisfies its ongoing obligations under the agreement.

JPMorgan Chase, UBS AG and Wachovia Bank also reached agreements with the DOJ and other federal and state agencies to resolve anticompetitive conduct in the municipal bond derivatives market and agreed to pay $228 million, $160 million and $148 million, respectively to federal and state agencies for their participation.

To read the full Justice Department announcement: click here.

To read the statement made by Oregon AG John Kroger: click here.