A former Bank of America trading desk manager will not serve prison time for his role in a scheme to falsify municipal bond records, a federal judge ruled Friday.
Brian Scott Zwerner, who once managed the Charlotte-based bank’s municipal derivatives trading desk, was sentenced to three years of probation and ordered to pay a $10,000 fine by U.S. District Judge Victor Marrero in New York. According to court documents, he has also agreed to pay Bank of America $890,000 in restitution.
Zwerner had faced a maximum penalty of five years in prison and a $250,000 fine for falsifying bank records, the U.S. Department of Justice said at the time of his guilty plea in 2011.
The sweeping federal investigation has resulted in convictions or guilty pleas from at least 17 others involved in the scheme, according to the Justice Department.
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The probe has focused on a key funding tool, municipal bonds, used by state and local governments and other public bodies. Public bodies invest the proceeds until it’s time to use them for their intended purposes, such as schools, hospitals and roads.
Federal prosecutors said Zwerner falsified records so Bank of America could pay kickbacks to brokers, including California broker CDR Financial Products. CDR and its owner pleaded guilty in 2011 to bid-rigging and fraud conspiracy charges involving municipal bonds.
The kickbacks were in exchange for brokers manipulating bidding processes in order for Bank of America to win municipal finance contracts, such as investment deals, prosecutors said.
Zwerner, who worked in the bank’s Chicago office, understated marketing profit information on documents for contracts so money could be accumulated off the books and used to pay kickbacks, prosecutors said.
Zwerner, who cooperated with investigators, took part in the scheme from 1999 to about 2002, prosecutors said. Zwerner’s attorney, Katya Jestin, declined to comment.
Other Bank of America employees have pleaded guilty to involvement in the scheme involving CDR, including Phillip D. Murphy, who once worked in Charlotte as the bank’s managing director of municipal derivatives products.
Murphy, who was managing director from 1998 to 2002, pleaded guilty in February and is awaiting sentencing.
In 2010, Bank of America paid restitution of $137 million in a government settlement to resolve the claims that its employees had taken part in the bid-rigging scheme.
That settlement included $3.4 million for North Carolina and resulted from a 2007 leniency agreement the bank reached with the Justice Department, which spared it from criminal prosecution.
Bank of America won leniency when it self-reported its employees’ activities to the Justice Department, prompting the investigation.
Bank of America spokesman Bill Halldin declined to comment Friday.