If you google cdr and lawsuits you will find 18 municipalities have filed lawsuits against them in addition to the FBI raid of their offices in 2006 and the ongoing investigation. David Rubin is friends with future Orthodox Union leader (executive vice-president) Rabbi Steven Weil.
I wonder how convincing is it for Bill Richardson to claim ignorance about bribery? If someone gives you money and you give them business, can you say, oh that guy took advantage of every municipality south of the Mason-Dixon line?
I’m looking at this SEC cease-and-desist against David Rubin.
Rubin gets cities to go out and raise money through the likes of Goldman Sachs. That gives cities some cachet to tap into people like Goldman who will buy the bonds from places such as South Carolina Hickville. The city may not want to use the money right away. Rubin came up with a way for the city to invest the money while they wait to build a freeway or the like. So while the city may owe the bondholders 4%, they can make say 7% on their money through Rubin. The IRS has a problem with it because it is arbitrage. You can borrow money at 4% because the bond interest is tax-exempt. If you invest the money at a profit, the IRS can rule that the bond interest is no longer tax free, which results in a disaster for the investors.
David Rubin told municipalities that he had a way of avoiding this IRS scrutiny. This was not true. It bollixed the whole deal. He gets cities to use his services based on misstatements of fact (according to this SEC filing).
When the SEC told David Rubin, you have to stop breaking the law, it destroyed Rubin’s business.
Ever since New Mexico governor Bill Richardson withdrew his nomination for Commerce Secretary citing an investigation into the company that obtained a contract to advise the state on bond deals, news reports have been making reference to a broader nationwide probe of alleged price-fixing and corruption in the municipal bond industry, which the New Mexico investigation grew out of.
Here at Muckraker, we’ve started looking into that larger ongoing story, and today the New York Times delivers a helpful takeout on the subject — though many of the details still remain murky.
…CDR, the firm that’s being investigated in New Mexico, leading to Richardson’s withdrawal, is one such company that handles derivatives.
That firm and two that do similar work — Investment Management Advisory Group, (known as "Image"), and Sound Capital Management — had their offices raided by the FBI in 2006 as part of the investigation.
The former Treasurer of the city of Phladelphia is currently in jail for accepting illegal payments in exchange for giving city bond business and other contracts to selected companies. CDR and Image appeared frequently in the indictments, and CDR was found to have paid for the Treasurer’s trip to the Super Bowl, but neither firm was formally charged.
…The exact mechanism or mechanisms by which these scams works remains a bit obscure, and may vary from case to case. But the broad picture is clear: financial firms, including some Wall Street powerhouses (at least until recently) are suspected of colluding to rip off state and local governments — that is, taxpayers — for billions.
Contributions from CDR Financial Products and its owner to Gov. Bill Richardson have grabbed the most headlines in recent days. But a new report (pdf) from the National Institute on Money in State Politics shows that CDR and owner David Rubin have spread the money around, giving another $91,000 to Democratic elected officeholders and party officials in six other states in the last few years.
The report doesn’t count the $100,000 that CDR and Rubin gave to two political action committees that Richardson started and that figure in a federal probe that cost him a Cabinet post. It only shows the $20,000 that CDR and Rubin gave to Richardson for his 2006 re-election campaign, and $10,000 that was given to Lt. Gov. Diane Denish.
MORE:
Some More Odds And Ends …
… are emerging about CDR Financial Products boss David Rubin, the business he’s done in Pennsylvania, and the politicians and causes he’s chosen to support:
- In May 2005, Rubin made a $10,000 donation to the Philadelphia Future PAC, whose treasurer is David L. Cohen, the Comcast Corp. exec and longtime friend-of-Ed Rendell.
- In 2000, Rubin also donated $2,500 to state Sen. Vince Fumo.
- And in 2002 and 2003, he donated at least $10,000 to former Philly Mayor John F. Street, campaign finance records showed.
Customers of Philadelphia Gas Works will pay $60 million to bail the company out of a financial deal gone sour and to bolster an overall bleak financial condition.
Beginning Jan. 1, PGW customers began paying 5.2 percent more to heat their homes. That increase wiped out most of the benefits of a temporary 9.4 percent rate cut PGW had provided, as required by the state, because it was paying less for natural gas.
This means that while utility companies across the Northeast slash rates, customers of the city-owned PGW are seeing little benefit.
PGW may pay as much as $30 million of the $60 million to escape a complicated transaction called an interest-rate swap. The deal was arranged in part by CDR Financial Products, the company at the center of the federal pay-to-play investigation of Gov. Bill Richardson of New Mexico.
CDR, headquartered in Beverly Hills, became known to Philadelphians in 2004 when its name surfaced in a City Hall corruption scandal involving lawyer Ronald A. White and Corey Kemp, the city’s treasurer at the time. Kemp is serving a 10-year prison term for his involvement; White died before he could be tried. CDR was never charged in the case and continued to do work for the city.
The plummeting economic climate has roiled financial transactions entered into by many states, counties and cities. Baltimore, joined by the cities of Oakland and Fresno, the state of Mississippi, and others, is suing a number of banks and financial advisers. The suit alleges the brokers and banks conspired to fix prices of derivatives by bid-rigging. The case springs from a lengthy ongoing investigation by three federal agencies into municipal derivatives.
CDR and the bankers in the PGW deal, JPMorgan Chase & Co., are included in the Baltimore suit. JPMorgan declined to comment on the lawsuit. CDR maintains it has always acted ethically.
PGW and Philadelphia have not blamed CDR or JPMorgan for their investment problems.
CDR said it was only one of several advisers on the PGW deal and blamed the bad outcome on the economy.
