BofA is assisting U.S. in price-fixing probe

Bank of America Corp. said Friday that it was assisting the Justice Department in an unprecedented federal price-fixing probe related to the municipal bond market, which probably will shield the bank from potential criminal prosecution.

The Antitrust Division of the Justice Department in mid-November made public a highly unusual criminal investigation of how muni bond proceeds are invested. The Securities and Exchange Commission and the Internal Revenue Service also are participating in the probe.

Regulatory and municipal market participants have said this probe will likely lead to the uncovering of misuse of derivatives, whose use is booming in the $2.3-trillion muni market.

Bank of America also said Friday that it agreed to a $14.7-million settlement with the IRS over the bank’s role in the use of guaranteed investment contracts, which are at the heart of the price-fixing probe, and other agreements related to “blind pool” bond transactions.

Regulators last year said they were looking into potential bid-rigging in the awarding of guaranteed investment contracts, which are used to park muni bond proceeds. The contracts are commonly held by retirement funds and are generally issued by insurance companies.

So far, the multi-agency probe has resulted in at least 30 firms receiving federal subpoenas and three firms being raided by agents from the FBI.

“This amnesty grant was a result of the company voluntarily providing information to the department before the department began its investigation, as well as the company’s continuing cooperation,” Bank of America said in a statement.

The Charlotte, N.C.-based company said it did not admit liability under the Internal Revenue Code. Its shares fell 33 cents to $52.99.