U.S. Files Charges in Probe of Municipal Bond Bidding : Securities: Bay Area firm is targeted. Officials say case is first of its kind.

The Justice Department revealed a criminal investigation of the $1.2-trillion municipal bond market as it filed securities fraud charges against a San Francisco firm that refinanced bonds for the city of Tampa, Fla.

The department’s antitrust division called the case the first prosecution of its kind and said Thursday that it was the outgrowth of an ongoing federal grand jury investigation into collusive bidding and fraud in a complex area of the municipal bond market. The agency’s investigation, which continues, is national in scope.

The municipal bond market plays a central role in paying for construction of highways, schools, sewage treatment plants and other public facilities. The SEC has been investigating corruption in the muni bond market for several years and brought cases in New Jersey and Oklahoma earlier this year.

The two-count criminal case filed Thursday against Municipal Government Investment Associates Inc. charges the firm with submitting false and collusive bids and bid certification letters during a 1992 refinancing of $138.6 million in Tampa muni bonds.

Christopher S. Crook, a Justice Department attorney in San Francisco who handled the case, said the government did not allege that Tampa lost money in the transactions. Instead, it charged that Municipal Government Investment Associates failed to disclose $1.2 million it made on the sale of “forward contracts” for Treasury bonds.

Forwards are a type of futures contract that gives the purchaser the right to buy or sell bonds, for example, at a specified price for delivery or settlement at a later date. These contracts are used in the refinancing of muni bonds.

A man who answered the company’s telephone Thursday declined to identify himself and refused to comment. A call to the company’s attorney, John Bartko, was not immediately returned.