Municipal Bond Fraud – Multiple Banks – $70 million

Our firm is proud to be a member of the legal team representing the whistleblower in a recent municipal bond fraud settlement.  The $70 million qui tam settlement was with eight of the nation’s largest banks.  It is the largest reported settlement ever under the Illinois False Claims Act.

Largest Reported Recovery Under the Illinois False Claims Act

Our client, Edelweiss Fund LLC, alleged that various affiliates of eight large banks engaged in widespread fraud and collusion in the fees they charged and the interest rates they set for tax-exempt municipal bonds known as VRDOs.  The defendant banks included: Bank of America, Barclays, Citigroup, JPMorgan Chase, Morgan Stanley, Fifth Third Bancorp, BMO, and William Blair.

Specifically, Edelweiss alleged that, while Illinois hired the defendant banks to market and price the bonds at the lowest possible interest rates, they instead engaged in a scheme to inflate the rates to collect millions in fees without providing the services for which they were retained.  Edelweiss further alleged that the banks did this, among other reasons, to avoid having the bonds tendered back to them.

The Relator Has Alleged that the Municipal Bond Fraud Extended Beyond Illinois

Edelweiss has brought similar lawsuits alleging the same municipal bond fraud scheme.  Three additional cases — in California, New York, and New Jersey — are continuing.

Edelweiss’s principal is Johan Rosenberg.  He has more than 30 years’ experience advising municipalities on VRDOs and other types of municipal bonds.

I am gratified by the settlement and hopeful we will obtain similar results for the other states.  My goal continues to be securing for my clients and other state and local governments the lowest-cost municipal bond financing possible to maximize the overall benefit the public receives from the critical government projects these VRDOs fund.

–Johan Rosenberg

Under the Illinois False Claims Act and numerous other states, whistleblowers can bring lawsuits on behalf of the government against those committing fraud against the government. In return, successful whistleblowers can receive up to 30% of what the government recovers from the lawsuit.

For its successful settlement in Illinois, Edelweiss received the maximum reward of 30% of the government’s $48 million portion of the settlement.  The remaining $22 million went towards Edelweiss’ legal fees and expenses in bringing the suit.

The Legal Team

Edelweiss is represented in these matters by a large team of lawyers across the country.  In addition to Whistleblower Law Collaborative LLC, the firms include Constantine Cannon, Schneider Wallace Cottrell Konecky LLP, McKool Smith, Behn & Wyetzner, DiCello Levitt LLP, Steyer Lowenthal Boodrookas Alvarez & Smith LLP, Stone & Magnanini LLP, and Howard Law.  Erica Blachman Hitchings and David Lieberman are the WLC attorneys working on the Edelweiss matters.