Large financial firms accused of fixing bond prices | Business

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The Pennsylvania Treasury Department accuses a dozen major financial firms of working together to illegally inflate the price of bonds issued by Fannie Mae and Freddie Mac over seven years.

On Thursday night, a case filed in federal court by Pennsylvania Treasurer Joe Torsella cites what his office says is evidence of a “co-operative co-conspirator” in a United States Department of Justice investigation into secondary market pricing of bonds issued by government-controlled companies. .

Evidence cited in the record includes brief transcripts of what it says are online discussions conducted by traders from various financial institutions who are the largest bond traders.

During the talks, traders reportedly agreed to price the bonds at artificially inflated prices, misleading Pennsylvania and other bond buyers. The pricing began in 2009 and lasted until 2015 and violates federal antitrust law, according to Torsella’s filing.

Analysis shows that pricing models are consistent with such a pricing deal, according to the filing. The conspiracy’s “economic footprints” diminished after January 2016, when the co-conspirator discovered it, he said.

Confidentiality agreement

Torsella’s office said it was bound by a confidentiality agreement and could not reveal how it came to receive information from the cooperating co-conspirator. He wouldn’t say who the confidentiality agreement is with.

Bonds are a cornerstone for the investment portfolios of government and institutional investors. Thursday’s filing is part of a pending case in federal court in the Southern District of New York, led by Torsella’s office.

The Pennsylvania Treasury Department is seeking a class action lawsuit in the case, which has consolidated lawsuits from various government entities, labor unions and public pension systems, including the city of Baltimore.

He said various agencies in Pennsylvania bought or sold $ 63 billion in so-called GSE bonds over the seven-year period. Torsella’s office is in the process of determining how much money state agencies have lost to the alleged pricing system, officials said.

The Justice Department has not filed any criminal charges and the co-conspirator is not directly identified in Torsella’s court record. Torsella’s case identifies Deutsche Bank Securities Inc as a co-conspirator and among various entities that participated in the violations but are not named as defendants. A spokesperson for Deutsche Bank declined to comment on Friday.

PA

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