Puerto Rico Retiree Plan Accuses UBS and Others of Bond Price Rigging

The Puerto Rico Government Employees and Judiciary Retirement Systems Administration, a pension plan for retirees of the U.S. territory’s government, has filed a proposed securities class action in federal court against Bank of America (BAC), Goldman Sachs (GS), Citigroup (C), Barclays Capital, Inc. (BARC), BNP Paribas Securities Corp., Bank of America Securities, Credit Suisse Securities, FTN Financial Securities, Deutsche Bank Securities, JP Morgan Securities, Morgan Stanley (MS), Merrill Lynch, Pierce, Fenner & Smith, and UBS Securities. The retirement fund is accusing the defendants of rigging bond prices to keep the prices up on Freddie Mac and Fannie Mae bonds.

Freddie and Fannie, both U.S. government-sponsored entities (GSEs), offer bonds to raise money for loans. According to the Puerto Rico pension plan’s bond fraud case, the trading desks of the various banks worked together to artificially raise the prices of the GSE bonds when the market took a hit after the 2008 financial crisis and Fannie and Freddie started reducing the number of bonds issued for sale. This decrease led to a loss in profits for those underwriting and trading in Fannie Mae and Freddie Mac bonds. The plaintiff contends that instead of the banks opting to lower the difference between their purchasing and selling prices and competing for clients, they worked together to fix the bond prices so they could “maximize” their profits at the expense of customers.

The Puerto Rico retirement plan’s complaint comes weeks after another proposed class action was brought by two other pension funds also accusing banks of rigging the price of GSE bonds. The pension fund plaintiffs in that fraud case are the Trust and Sheet Metal Workers’ Local 19 Pension Fund and the Dallas Area Rapid Transit Employees’ Defined Benefit Retirement Plan. The defendants are Bank of America NA, Barclays Capital, Wells Fargo Securities, LLC, Citigroup Global Markets, Inc., BNP Paribas Securities Corp., Deutsche Bank Securities, JPMorgan Securities, HSBS Bank Plc, HSBC Securities, JP Morgan Chase Bank, TD Securities, Nomura Securities International Inc., and Merrill Lynch, Pierce, Fenner & Smith.

The pension funds allege that the defendants utilized insider knowledge and conspired together to rig bond prices and spreads to their benefit. The plaintiffs claim that the alleged collusion took place between January 2012 and June 2018 and involved traders from the defendant banks working together via chat rooms, texts, emails, and on the phone in “real time” to “fine-tune their conspiracy” and “maximize” results related to primary bonds and the secondary bond market.

Pension fund fraud cases

Our institutional investor fraud lawyers represent pension funds, hedge funds, and other investors that have sustained losses due to bond rigging and other types of fraud in the U.S. mainland and in Puerto Rico. Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) also has spent the last six years working with investors in Puerto Rico helping island residents and mainland investors to recover losses they sustained from investing in Puerto Rico bonds and closed-end bond funds. Contact SSEK Law Firm today to request your free, no obligation case consultation.

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