Photo: The Russia Forum
A former high-ranking executive at UBS and Lehman Brothers was arrested and faces up to 20 years in prison and $250,000 in fines for fraud, Bloomberg reports.Peter Ghavami, who is Belgian, and used to be head of Global Commodity Markets at UBS, was nabbed by police at JFK after arriving on a flight from Moscow.
He’s accused of taking a $100,000 kickback in a scheme in which bankers “steered” and “price -fixed” investment contracts with U.S state governments and banks between 2001 and 2002.
The fraud involved brokers paying states and local governments “below-market rates on investments purchased with bond proceeds,” according to Bloomberg.
Ghavami’s arrest is part of a massive federal probe into shady investment contracts between banks and the states, in which 15 former bankers and advisers have been charged.
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UBS, JP Morgan, Bank of America, Wachovia, Citi and Lehman – they’ve all got a former employee implicated in the investigation. Eight of them have already plead guilty – one, a JP Morgan banker, admitted to bid-rigging just this week.
Ghavami is actually the second ex-UBS worker to be implicated in the investigation.
Ghavami was co-head of the municipal derivatives group before he was made commodities chief. He was with the bank between 1999 and 2007.
He is currently Head of Global Markets at at Russian investment bank, Troika Dialog. Before that he was CEO for Russia and the CIS at Standard Bank; Head of Russian and CIS Capital Markets at Lehman Brothers.
Here’s what Ghavami did specifically, from Bloomberg.
Ghavami worked as a broker in 2001 to an unidentified state that sought a contract to invest bond proceeds… While the agreement was supposed to be awarded to the lowest-cost bidder, Ghavami arranged for the deal to go to the unidentified Charlotte-based bank in exchange for a kickback.
Ghavami had a certificate, falsely claiming that the price of the investment contract was determined through an arms-length transaction… After that bank won the agreement, Ghavami asked the unidentified CDR employee to call the banker and remind him to pay the kickback. In February 2002, Ghavami’s employer received the $100,000, which was “disguised as a ‘re-hedge’ fee,” the government said.
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