A Beverly Hills financial firm and its founder pleaded guilty to federal criminal charges that they defrauded government agencies by steering investment contracts to firms that paid them kickbacks.
David Rubin, 50, and his company, CDR Financial Products Inc., were accused of running sham auctions for government agencies looking to invest money raised through municipal bond offerings.
The contracts were awarded to favored firms that secretly paid kickbacks to CDR, not always the firm offering the highest returns, the government alleged.
Rubin, who sobbed at Friday’s plea hearing in New York, is scheduled to be sentenced April 27. He had unsuccessfully requested a delay in his trial to be with his wife, who is dying of cancer.
Two former CDR executives are scheduled to stand trial on similar charges next week in federal court in Manhattan.
“Mr. Rubin and his firm were trusted with public money and confidence to assist municipalities with issuing bonds,” FBI Assistant Director in Charge Janice K. Fedarcyk said in a statement. “Contrary to his agreement and the law, Mr. Rubin shirked his responsibilities while defrauding taxpayers. Thankfully, this bid-rigging scheme, where Mr. Rubin decided the winners and losers, is over.”
Rubin developed a niche helping local, county and state agencies invest money raised from bond issues funding such things as school or road construction.
Because government agencies typically don’t need to use the money immediately, they often hire companies such as CDR to arrange short-term and longer-term deals to invest the funds.
The indictment alleged that CDR engaged in a pay-to-play scheme in which investment companies secretly paid CDR kickbacks to win government contracts. The scheme cost the government agencies money because the contracts did not always go to investment providers offering the best return, the indictment said.
Rubin is the 10th person to plead guilty in an ongoing federal investigation of the municipal bond industry, the Justice Department said in a news release.
Federal prosecutors had amassed almost 800,000 tape recordings and 125 million pages of documents during a three-year investigation of CDR, defense lawyers said earlier this year.
The charges that Rubin pleaded guilty to carry a maximum sentence of 35 years in federal prison and fines in excess of $1 million.
Bloomberg News was used in compiling this report.