MTA, Securities Firm Hold Talks Over Dispute
The Metropolitan Transportation Authority and Lazard Freres & Co. are in talks to end almost 2 1/2 years of litigation concerning overcharging on bonds, an attorney for the Los Angeles County authority said.
“There are settlement talks,” said Steven Carnevale, counsel for the MTA. “We are making an attempt and hopefully something will come of it.”
Carenvale declined to say how much the MTA wanted in the settlement and how much Lazard was offering.
The MTA charges that Lazard cheated it out of $3 million by inflating the price of U.S. Treasury bonds sold to the authority in May 1993 as part of a municipal debt refinancing. Lazard is the first securities firm to be accused by state, city or public agencies of such overcharging, a practice known as yield-burning.
The MTA charges that Lazard took advantage of its position as the agency’s financial advisor to overcharge it for securities used in its debt refunding. The authority has said it seeks $15 million in compensation plus punitive damages.
Lazard said the securities actually cost the agency about $3.9 million less than to buy slugs, or special securities sold by the Treasury for municipal escrow accounts.
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