GE Funding Capital Market Services (CMS) has agreed pay $70m to settle securities fraud charges that it participated in a wide-ranging scheme involving the reinvestment of proceeds from the sale of municipal securities.
GE Funding CMS agreed to settle the SEC’s charges by paying $25m that will be returned to affected municipalities or conduit borrowers.
The firm also entered into agreements with the Department of Justice, Internal Revenue Service, and a coalition of 25 state attorneys general and will pay an additional $45.35m.
SEC said that GE Funding CMS illegally generated millions of dollars by fraudulently manipulating at least 328 municipal bond reinvestment transactions in 44 states and Puerto Rico from August 1999 to October 2004.
In settling the SEC’s charges without admitting or denying the allegations, GE Funding CMS agreed to pay a $10.5m penalty along with disgorgement of $10,625,775 with prejudgment interest of $3,775,987.
SEC chief of Enforcement Division’s Municipal Securities and Public Pensions Unit Elaine Greenberg said that GE Funding CMS’s fraudulent practices and misrepresentations undermined the competitive bidding process and negatively impacted the prices that municipalities paid for reinvestment products.
"The firm’s misconduct deprived municipalities of a conclusive presumption that reinvestment instruments were purchased at fair market value," added Greenberg.