Content area
Full Text
The Sacramento Municipal Utility District on Nov. 12 filed a lawsuit against 47 financial institutions, including Goldman Sachs Group Inc. and Bank of America NA, for conspiracy to rig bids for municipal derivatives.
Through a competitive bidding process, U.S. public entities and nonprofits offer proceeds from municipal bond sales to financial institutions, which in turn offer either a fixed periodic payment or a fixed interest rate, depending on the type of derivative transaction, according to SMUD General Counsel Arlen Orchard.
The lawsuit alleges that financial institutions were in collusion with one another to rig this process, removing the competitive element to offer lower fixed periodic payments or higher fixed interest rates. The institutions also charge fees in association with the derivative transactions, and in a noncompetitive market, these fees would be higher.
"With antitrust litigation, what you really are arguing is that because of this...