US judge orders firms to defend municipals suit

Business Law

About a dozen banks and financial firms must defend allegations of bid rigging, limited competition and price fixing in the municipal derivatives market, a U.S. judge ruled on Thursday.

U.S. District Judge Victor Morrero's written order said the defendants, including Wells Fargo, JPMorgan Chase, UBS AG, Morgan Stanley and others, should prepare for a pretrial conference on April 30.

The case is In Re Municipal Derivatives Antitrust Litigation, U.S. District Court for the Southern District of New York, No. 08-2516.

In 2006, the U.S. Justice Department, Internal Revenue Service and Securities and Exchange Commission launched a sweeping investigation into how the derivatives, known as guaranteed investment contracts, had been priced.

Municipal bond issuers had frequently parked their proceeds from debt sales by buying these contracts, which generate income, until they needed to spend the money.

While the investigation cooled down by early 2009, with information occasionally trickling out in the banks' and insurance companies' SEC filings, it has heated back up in the last few months. At the same time, a number of counties and cities have moved to sue the companies involved.

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