The US Securities and Exchange Commission (SEC) Thursday said J.P. Morgan Chase has agreed to pay $228 million to settle allegations of rigging municipal bond deals.
As part of the settlement, J.P. Morgan will return about $51.2 million to municipalities and borrowers affected by the fraud, according to a statement released by the SEC.
In addition, J.P. Morgan has agreed to pay an additional $177 million to settle similar charges brought by other federal and state authorities.
The SEC said the charges stemmed from “at least 93 municipal bond reinvestment transactions in 31 states” which generated “millions of dollars in ill-gotten gains” for a small unit of the investment banking giant.
According to the SEC, J.P. Morgan improperly won municipal bond contracts by entering into “secret arrangements” with bidding agents that allowed the bank to get illegal last looks at the bids of their competitors.
“Municipal issuers and investors didn’t stand a chance against the fraudulent strategies (J.P. Morgan) and others used to guarantee profits,” Robert Khuzami, director of the SEC’s Division of Enforcement, said in a statement.
The SEC said the fraud occurred during a seven year period from 1997 to 2005.
J.P. Morgan neither admitted nor denied the charges. A spokesman for the bank did not immediately respond to a request for comment.
The SEC noted that it has reached two earlier settlements on related charges with UBS and Bank of America.
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