NC Nonprofits, Government Agencies will Receive Settlement Funds in Bid Rigging Case

NC Nonprofits, Government Agencies will Receive Settlement Funds in Bid Rigging Case
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February 26, 2016

North Carolina nonprofits and government agencies will be getting part of a $56 million national settlement with financial companies that were involved in a bid rigging scheme.

Natixis Funding Corp. and Societe Generale are charged with defrauding local governments, hospitals, and housing agencies in 22 states since the early 1990s.

Under two multistate settlements, Natixis will pay $29.95 million and Societe Generale will pay $26.75 million to government agencies and non-profits that entered into municipal derivative contracts with the companies between January 1, 1992 and August 18, 2011.

The settlements resolve allegations that Natixis and Societe Generale defrauded cities, counties, schools, colleges and hospitals that purchased municipal bond derivatives, a type of investment offered by both banks. Governments and non-profits use municipal bond derivatives to reinvest the proceeds from tax-exempt bond offerings until the funds are needed or to protect their investments from fluctuating interest rates.

In April 2008, North Carolina Attorney General Roy Cooper and other state attorneys general began investigating allegations that some banks, insurance companies, brokers and swap advisors had engaged in deceptive and fraudulent conduct in the municipal bond derivatives market. The ongoing investigation has so far revealed that Natixis, Societe Generale, Wachovia, GE, JP Morgan Chase, UBS, Bank of America, and certain brokers tampered with the investment process by rigging bids and submitting non-competitive courtesy bids. As a result, governments and non-profits got artificially low rates of return on these investments or paid higher rates than they should have.

Natixis and Societe Generale are the sixth and seventh financial institutions to settle in the ongoing investigation. About $400 million has been recovered as part of the settlements.

Among others, the North Carolina Housing Finance Agency, North Carolina Medical Care Commission, Mecklenburg County, Raleigh Housing Authority, Housing Authority of the County of Wake, and the North Carolina State Education Assistance Authority are eligible for part of the settlement.

"Taxpayer-funded schools, hospitals, and local governments paid the price when big banks rigged the system and hurt their ability to grow savings," Cooper said in a press release.