“Prior to resetting VRDO interest rates, banks” regularly “shared” their base rates, inventory levels, and expected rate changes, “using” low-coding questions “to coordinate and” make sure none of them broke ranks, ”Judge Jesse M. Furman wrote.
These exchanges reflect “the types of forward-looking and price-carrying communications that may support an inference that there was a price-fixing plot,” the judge said.
In addition to BofA, Citi, JPMorgan and Goldman, the proposed class action lawsuit targets subsidiaries of
The lawsuit accuses the banks of colluding among themselves in order to obtain higher rates for VRDO bonds than they had promised in their “remarketing” agreements with the cities that issued them.
The contracts forced the banks to set the lowest interest rate the market would bear. Their ploy was to allow them to set higher prices without being replaced by the issuing cities, which would have found cheaper resellers in the absence of collusion, according to the lawsuit.
The illegal coordination was reportedly exposed after the Securities and Exchange Commission and the Department of Justice launched investigations in 2015 and 2016, respectively, based on a whistleblower complaint.
The case is City of Philadelphia v. Bank of Am. Corp., SDNY, No. 19-cv-2667, 11/2/20.