Philly-based SEC lawyer probes banks for ripping off towns

Philadelphia-based Securities and Exchange Commission lawyer Elaine Greenberg, a Bucks County resident, leads "the most ambitious... crackdown on regulatory abuses in the $2.8 trillion U.S. municipal bond market" in recent years, Bloomberg reporter Martin Z. Braun claims here.

"She'll direct the SEC's attention to states and cities as part of a focus on the tax-exempt market... In her sights are possible bid-rigging for municipal-investment contracts by banks including JPMorgan Chase & Co. and Bank of America Corp., public officials who hire advisers based on political contributions and local governments that fail to disclose their true financial condition..

"Greenberg was tapped in January to head the SEC's municipal securities and public pensions unit, one of five task forces created after the global credit crisis and the SEC's failure to detect Bernard Madoff's $65 billion Ponzi scheme."

SEC, Justice and the IRS are "looking into the possible manipulation of bids by brokers that allowed banks to pay municipalities below-market interest rates on the investment of proceeds of bond issues. The commission has informed companies" including units of JPMorgan Chase, Bank of America, UBS, Wells Fargo and General Electric "that it determined sufficient wrongdoing occurred to warrant civil charges."

Past Greenberg targets include the former Meridian Bancorp's securities unit. "The SEC said Meridian marked up prices of Treasury securities used by municipalities in Pennsylvania and West Virginia to refund older debt. Meridian consented to $3.7 million of penalties without admitting or denying wrongdoing" as it prepared to be acquired by Philadelphia's CoreStates Financial Corp. (now part of Wells Fargo & Co.) A low-level Meridian employee ended up sentenced to prison on charges related to the case.

Greenberg also handled "an administrative proceeding in 2000 against the Allegheny Health Education and Research Foundation. The system of 14 Pennsylvania hospitals overstated income by more than $150 million, boosting risk for investors holding more than $900 million of debt. Two former Allegheny chief financial officers and an accountant at PricewaterhouseCoopers LLP agreed to pay a total of $105,000 in fines to settle the case without admitting or denying wrongdoing."

Back in 2006, Greenberg and her deputy, Mark Zehner, "oversaw a suit against Dolphin & Bradbury, a Pennsylvania investment bank that sold school districts risky short-term notes issued to finance a golf course. The notes defaulted, resulting in $11 million in losses. The firm's securities registration was revoked and it, along with its chairman, Robert Bradbury, and his wife paid $5 million in fines. Bradbury, who agreed to be barred from the industry, pleaded guilty in a criminal case and was sentenced to a year and a day in prison." The case came after Dolphin lost its old position as a leading underwriter of bonds in Republican-run PA towns.