bid-rigging

Bid-rigging is a pretty boring crime because, like a lot of economic crimes, it is so close to being just fine. If I see a deep-pocketed competitor trying to buy a thing that I also covet, I may decide to spend my time elsewhere rather than bid against them and risk ending up with an expensive thing and a winner’s curse. That’s fine! But if I talk to them about it first, or even worse if I say I’ll hold off on bidding in exchange for them doing the same on the next deal, it’s not fine. You can see why there’d be a difference but it’s not a matter of life and death or anything, it’s just behavior (not bidding on things that are too competitive) that we are willing to tolerate but that we don’t want to encourage with too much conniving about it.

Since it’s kinda boring it tends to get juiced up rhetorically. Enter Harry First:

“The famous phrase is a ‘smoking gun.’ That’s a smoking H-bomb,” said Harry First, a former antitrust lawyer for the Department of Justice. “When the talk is explicitly about getting together to avoid bidding each other up, it’s a red flag for collusion, bid-rigging, market allocation.”

When the talk is explicitly about market allocation, BOOM SMOKING H-BOMB.* Anyway that thermonuclear talk came of course from today’s, really every day’s, miscreants, the good folks at Chesapeake Energy, who Reuters reports were maybe talking with their competitors at EnCana about maybe splitting up the bidding on Collingwood shale leases in Michigan, which would be bad. Read more »

  • 19 May 2010 at 5:23 PM

UBS Trader Pleads Guilty in Massive Bid Rigging Scandal

Mark Zaino, a former UBS trader who worked on the firm’s derivatives and municipal securities desk, pleaded guilty to fraud and conspiracy charges today in the wide-ranging investigation into sham auctions and bid rigging in financial products sold to municipalities.

Zaino is the first banker to plead guilty to charges and he has agreed to cooperate with investigators. Another banker at Bank of America, who participated in the massive bid-rigging scheme, is also providing information to the Feds about the scam. Read more »

  • 18 May 2010 at 11:58 AM

Behind the Massive Conspiracy to Rig the Muni Bond Market

If you thought the SEC’s charges against Goldman Sachs poured fuel on an already-raging populace fire, Wall Street’s involvement in a massive bid rigging scandal in the $2.8 trillion municipal bond market will fan the flames even more.

Earlier this month, we heard about an SEC investigation of conflicts of interest at big banks that bought credit default swaps on muni bonds they sold to state and local governments. But Bloomberg is out with a big investigative piece today about a massive bid-rigging scandal in the muni market that, if true, bilked 160 state agencies, local governments and non-profits out of hundreds of millions of dollars. Read more »