Bank of America gets amnesty in derivatives probe

12 February 2007

Bank of America has reached a new leniency agreement with the US Department of Justice.

The second largest bank in the US has agreed to co-operate with an inquiry into bidding practices for local authority bonds and has been providing information to the Justice Department, but has not admitted to any wrongdoing.

Announcing the amnesty agreement from its headquarters in Charlotte, North Carolina, Bank of America said it had held talks with federal prosecutors.

The banking giant has paid around $14.7 million to the Internal Revenue Service (IRS) to settle claims relating to municipal bonds.

The inquiry into the municipal-bond market by SEC, IRS and federal prosecutors is now underway and is intended to discover how cities, local government authorities and other public institutions invest cash raised through the issue of municipal bonds.

SEC investigators will examine whether or not US banks colluded over bids for money generated by bonds to be temporarily invested.

The US issued municipal bonds worth around $380 million during 2006, with an outstanding volume amounting to over $2.3 trillion.

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