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State agrees on lawsuit settlement

The Royal Bank of Canada has agreed to pay West Virginia $175,000 to remove itself from a massive lawsuit involving allegations of collusion and bid riggings.

About a third of that money will go to the private attorneys hired by the state in the case.

The bank and the state Attorney General's Office agreed in April to the details of the settlement.

A judge approved the settlement in May, according to legal website Law360.

It's considerably less than the "millions and millions" of dollars promised from the Attorney General's Office when the lawsuit was filed in 2010.

The lawsuit isn't over yet, said attorney general spokeswoman Beth Ryan.

"RBC was one of 22 banks/financial institutions involved in the lawsuit at the time of the settlement. The case against 21 other companies is still ongoing," Ryan said Friday in an emailed statement.

"RBC was a very small player in the case and involved in an extremely small number of transactions that were at the heart of the lawsuit."

The lawsuit is "multidistrict litigation," which means West Virginia is one of many other states involved. Ryan said West Virginia was the only state with claims against RBC.

West Virginia and the others involved in the larger lawsuit allege the bank and other big companies - Bank of America, JP Morgan Chase, Merrill Lynch, Morgan Stanley, Wells Fargo -worked to earn money from sales involving something called municipal derivatives.

Municipalities frequently issue bonds when they want to fund capital projects. Financial institutions can use the money municipalities take in from issuing those bonds and invest them in the form of municipal derivatives.

It's a very large economic market and became an increasingly common way to invest in the last 20 years. However, West Virginia and many other states allege the companies worked together to create a system that earned them money that could have gone back to the public.

"Municipal derivative providers and brokers worked together to allocate municipal derivative transactions among themselves," West Virginia stated in a revised legal complaint, according to Law360.

"The conspiracy operated to deny West Virginia municipal bond issuers competition in the services provided by brokers of municipal derivatives, and to compel West Virginia issuers to pay excessive fees for such services."

The alleged illegal actions by many of the different companies involved include skirting competitive bid practices by agreeing on bidding amounts, not submitting bids or submitting very low bids so another company could win the contract.

The original West Virginia lawsuit alleges RBC participated in a "kickback" scheme involving revenue bonds from the West Virginia Infrastructure and Jobs Development Council. RBC allegedly worked with other companies in "swap" of contracts for bonds.

"RBC knowingly participated in the swap for the purpose of paying a kickback to (another company) in the furtherance of the conspiracy to fix bids, and allocate markets and consumers," the complaint states.

The complaint also alleges RBC won bids for municipal derivatives on other West Virginia bonds because other companies deliberately did not bid.

As part of the May settlement to which the attorney general agreed, RBC denies any wrongdoing. Other state bonds involved come from the state Water Development Authority, the Economic Development Authority, the School Building Authority and the Lottery Capital Improvement Revenue Bonds Fund, according to the Charleston Newspaper archives.

There is potentially still millions of dollars at stake in the lawsuit.

Following investigations by the U.S. Department of Justice, UBS AG and JP paid the department a combined $388 million in restitution, according to Law360. In November 2011, Wells Fargo agreed to settle its part of the lawsuit for $37 million, according to Law360.

Ryan emphasized West Virginia is still engaged in lawsuits with the remaining 21 companies.

Members of Charleston-based law firm DiTrapano, Barrett, DiPiero McGinley & Simmons LLP are working as private attorneys on the case. They will receive $58,327.50 from the settlement for "fees," Ryan said. The firm will not be paid for their costs, she said.

Contact writer Dave Boucher at 304-348-4843 or david.boucher@dailymail.com. Follow him at www.twitter.com/Dave_Boucher1.  

 

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