Wall St. Bailout Buds 'Co-Conspirators' In Plot To Rip Off State, Local Governments

March 26 (Bloomberg) -- JPMorgan Chase & Co., Lehman Brothers Holdings Inc. and UBS AG were among more than a dozen Wall Street firms involved in a
conspiracy to pay below-market interest rates to U.S. state and local
governments on investments, according to doc**ents filed in a
U.S. Justice Department criminal antitrust case.

A government list of previously unidentified “co-conspirators” contains more than two dozen bankers at firms also including Bank of America
Corp., Bear Stearns Cos., Societe Generale, two of General Electric
Co.’s financial businesses and Salomon Smith Barney, the former unit of
Citigroup Inc., according to doc**ents filed in U.S. District
Court in Manhattan on March 24.

Gee, look how many were firms that were already taking money from us on the front end. They wanted the back end, too?

The papers were filed by attorneys for a former employee of CDR Financial Products Inc., an advisory firm indicted in October. The attorneys, as
part of their legal filing, identified the roster as being provided by
the government. The doc**ent is labeled “list of co-conspirators.”

None of the firms or individuals named on the list has been charged with wrongdoing. The court records mark the first time these companies have
been identified as co-conspirators. They provide the broadest
look yet at alleged collusion in the $2.8 trillion municipal securities
market that the government says delivered profits to Wall
Street at taxpayers’ expense.

Excuse me while I rush to my fainting couch. I'm a little dizzy from the shock.

“If the government is saying they are co-conspirators, the government believes they have sufficient evidence that they can show they were part of the conspiracy,” said Richard Donovan, a partner
at New York-based law firm Kelley Drye & Warren LLP and co-chair
of its antitrust practice. Donovan isn’t involved in the case.

The government’s case centers on investments known as guaranteed investment contracts that cities, states and school districts buy with
the money they receive through municipal bond sales. Some $400
billion of municipal bonds are issued each year, and localities use the
contracts to earn a return on some of the money until they need it for
construction or other projects.

The Internal Revenue Service sometimes collects earnings on those investments and requires that they be awarded by competitive bidding to ensure that governments
receive a fair return. The government charges that CDR ran sham
auctions that allowed the banks to pay below-market interest rates to
local governments.

[...] Banks may choose to cooperate with prosecutors because in light of the government bailout funds they’ve received “a guilty plea would just be an absolute
disaster for some of these companies,” said Nathan Muyskens, a
partner at Shook, Hardy & Bacon in Washington and former trial
attorney with the Federal Trade Commission’s Bureau of Competition.

“There have been antitrust investigations where there have been companies involved that were just never indicted,” he said in a phone interview.

Yes, this is what's now known as "too big to jail." Why, they're too big for just about anything!

At the same time, the government will probably focus on seeking to convict individual bankers, he said.

“When someone goes to jail for five years, that resonates,” he said. “When a company pays $200 million, it’s simply a balance sheet issue. Jail time
is what captures corporate America’s attention.”