Oakland says to sue leading banks over collusion

OAKLAND: The Californian city of Oakland said on Tuesday it would sue leading financial institutions including Bank of America, Bear Stearns Cos , JPMorgan Chase and Wachovia Corp over alleged collusion on investment contracts. In a statement, the city attorney's office said it would file the federal antitrust lawsuit against those firms and others on Wednesday, and announce details of the case at a 9:30 PDT (1630 GMT) news conference. The statement said the firms had engaged in "illegal price fixing and bid rigging" in their offers for guaranteed investment contracts, in which the city parks the proceeds of bond sales before using the funds.

"The lawsuit alleges that financial companies agreed among themselves to give Oakland and other American cities artificially low bids for guaranteed investment contracts," the statement said. "Without competitive bidding, there is no real free market, and financial companies and brokers were able to give cities abnormally low interest rates, thereby cheating taxpayers out of a reasonable rate of return on their investments. "This collusion among competitors is a clear violation of federal and state antitrust laws, which prohibit any agreement by companies to fix prices, rig bids or allocate specific customers," the statement added. Wachovia, the fourth-largest U.S. bank, said in February that two employees in its main banking unit were targets of a U.S. Department of Justice municipal bid-rigging probe.

Investigators said in November 2006 they were examining potential bid-rigging across many companies in the awarding of guaranteed investment contracts. In February, the Bank of America said it agreed to a $14.7 million settlement with the Internal Revenue Service over the bank's role in the use of guaranteed investment contracts at the heart of the price-fixing probe.