Former CDR Financial execs sentenced in muni bid-rigging case

Reuters News
Posted: Apr 11, 2013 3:38 PM

By Bernard Vaughan

NEW YORK (Reuters) - A federal judge sentenced the former chief financial officer of CDR Financial Products to 18 months in prison on Thursday for his role in a multimillion-dollar, bid-rigging scheme in municipal bonds.

Zevi Wolmark, who used to work at the Los Angeles-based financial services company, was also sentenced to two years of supervised release and ordered to pay a $500,000 fine. Several friends and family members of Wolmark, who has 10 children, sobbed as Judge Harold Baer delivered the sentence in U.S. District Court in Manhattan.

Wolmark, whom a prosecutor described as the "Number Two" man in the scheme, told the judge before his sentencing that he was "a very sorry and humble man....

"I want to apologize to the court for my role in rigging bids," Wolmark said.

Baer also sentenced two other former employees of the company for their roles in what he called "a fairly gigantic fraud."

Evan Zarefsky, formerly a vice president with the company, was sentenced to eight months in prison, two years of supervised release, and ordered to do six months of community service and pay a $17,500 fine. Matthew Rothman was sentenced to six months in prison and two years of supervised release, and ordered to pay a $15,000 fine.

The charges stem from an investigation begun in 2006 by the U.S. Treasury and Justice Departments and the Internal Revenue Service into how municipalities award guaranteed investment contracts, which are used to invest proceeds from bond sales.

UBS and JPMorgan Chase & Co entered into non-prosecution agreements with the Justice Department in connection with the investigation, while Banc of America Securities settled with the U.S. Securities and Exchange Commission.

More than $743 million has been recovered from financial institutions in the course of investigations, the SEC has said.

Both Wolmark and Zarefsky pleaded guilty last year to two conspiracy charges and a charge of wire fraud. They admitted that CDR and some of its employees accepted kickbacks from financial institutions in exchange for CDR's help in awarding municipal bond contracts without a true competitive bidding process.

Wolmark testified at a 2012 hearing that the scheme ran from 1998 through November 2006, while Zarefsky has said that his involvement began soon after he joined the firm in 2000. The bid manipulation led to inflated unearned fees for the company, among other financial benefits, according to Wolmark.

The founder of CDR, David Rubin, is slated to be sentenced on June 28. Rubin, whom prosecutors describe as the leader, pleaded guilty in late 2011 to one count each of wire fraud, conspiracy to restrain trade and conspiracy.

Lawyers for Wolmark, Zarefsky and Rothman either declined to comment or could not be reached for comment.

The cases are: U.S.A. v. Rubin/Chambers et al., U.S. District Court, Southern District of New York, No. 09-1058; and USA. v. Matthew Adam Rothman, in the same court, No. 10-0029.

(Reporting by Bernard Vaughan; Editing by Leslie Gevirtz)