Jane emails: "You have guts to take on David Rubin. He is one of the most powerful orthodox Jews in LA. Based on the research you have compiled it seems that he has his hands full. But – have you investigated the earlier issues he was involved with that involved “Guaranteed Investment Contracts” and his contrived municipal bond deals where he made money and everyone else lost? Read the excellent NY Times article that will come up when you Google him. Interesting that no one mentions his partner, Zev Wolmark – Hancock Park resident and Kollel Member. He knows everything there is to know."
The Justice Department asked for information from as far back as 1992, including files on guaranteed investment contracts and other financial products, such as derivatives. A derivative is a financial contract whose value is derived from tradable securities or linked to events such as interest-rate changes.
Investigators also subpoenaed three firms that advise local governments on derivatives and evaluate bids for guaranteed investment contracts: Beverly Hills, California-based CDR Financial Products Inc., Pottstown, Pennsylvania-based Investment Management Advisory Group Inc. and Sound Capital Management of Eden Prairie, Minnesota.
All three said in statements that they are cooperating with the investigation and defended their work.
The municipal finance industry was rocked by scandals in the 1990s, including a probe of influence peddling concerning so- called pay to play, in which banks gave public officials campaign contributions to win no-bid contracts. There was also the controversy over yield burning, in which banks and brokers overcharged local governments for Treasury bond investments.
Out of View
Local governments are required to solicit bids for guaranteed investment contracts. They rely on brokers such as CDR, which deal with the banks and provide documents certifying that the bidding is fair. States and cities only use competitive bidding for bond sales 20 percent of the time, down from 74 percent three decades ago.
“The way that these folks have operated, largely by telephone and largely out of public view, are not as transparent as they might be,” said Patrick Born, chief financial officer of Minneapolis and the head of the debt committee of the Chicago- based Government Finance Officers Association. “And it’s certainly possible that when you don’t have transparency you can have abuses.”
HERE’S A REPORT FROM SANTA FE:
The colorful history of CDR: Bloomberg.com, which has reported on the company for years, interviewed founder and chief executive officer David Rubin in 2006 in an article that mentions New Mexico, the GRIP project and the Richardson contributions.
Bloomberg quoted Rubin saying that CDR has advised clients on more than $158 billion in transactions since it was founded in 1986. The article said CDR has "advised local governments on more than $17 billion of derivatives since 2003."
The company originally was called "Chambers, Dunhill, Rubin and Co." — even though there was nobody named Chambers or Dunhill involved with the firm. Rubin "picked those names because he liked the sound of them together," Bloomberg reported.
Bloomberg also noted that the company "is being investigated by the IRS for possibly profiting from deals at the expense of U.S. taxpayers. According to IRS letters obtained from the cities of Atlanta and Fargo, N.D., and an internal memo from the state of Wisconsin, CDR may have colluded with Bank of America Corp., Bear Stearns Cos. and other companies to make improper fees by selling municipalities unneeded contracts or mispricing investment deals."
In April 2001, Bloomberg, citing court documents from a federal corruption trial, reported that CDR hired Philadelphia lawyer Ron White, who was chief fundraiser for Mayor John Street. The company paid White a $5,000 retainer to help CDR win work with the city.
"Rubin donated $15,000 to Street’s election committee from December 2000 to June 2003, the records show," Bloomberg reported. "In addition, CDR gave White three tickets to the 2003 Super Bowl game in San Diego and also provided a limousine ride to the stadium. White brought Philadelphia Treasurer Corey Kemp to the event."
