Justice Department fines company with CT connection $35M over bond trades lies
Nomura Securities has agreed to pay a $35 million penalty and make further restitution to customers it swindled by overcharging them in bond sales during the Great Recession, the U.S. Attorney’s office said.
In a settlement agreement released Tuesday, federal prosecutors said Nomura Securities International admitted that it increased its profit – and defrauded customers – on bond sales by lying about the sellers’ asking prices or introducing fictitious third parties to bond sales in order to collect unearned commissions.
The scheme was in place from 2009 to 2013, years immediately following the Great Recession of 2008, and victims included recipients of the federal bailout known as the Troubled Asset Relief Program, as well as firms representing pension funds, charitable and educational endowments and insurance companies.
Among the so-called Nomura victims were HIMCO, a subsidiary of The Hartford Financial Services Group Inc., and Greenwich-based Ellington Financial.
The settlement follows a disastrous attempt by the Justice Department to pursue criminal convictions of Nomura traders at a closely watched trial in Hartford in 2017. A jury largely acquitted three senior Nomura traders – defended by 26 lawyers – of dozens of fraud and conspiracy charges. One of the traders was convicted of a single conspiracy charge.
In their defense, the traders argued they were guilty at worst of making self-serving misstatements. They said it doesn’t matter whether they lie because their sophisticated institutional clients pay no attention to what they say anyway, relying instead on independent research.
The Securities and Exchange Commission asserted at the time that the “lies and omissions” by Nomura traders, who were acting as middlemen in bond trades, generated more than $5 million in additional revenue for Nomura.
The settlement and the earlier trial focused on Nomura trades in Residential Mortgage Backed Securities. The collapse of the housing mortgage markets were a trigger of the larger economic failure in 2008.
In addition to the financial penalty, Nomura agrees under the settlement to pay another $808,000 in restitution, in addition to the $20 million it previously paid under a settlement with the Securities and Exchange Commission.
The Justice department said Nomura cooperated in negotiating the settlement and it accepted responsibility for “Its and its employees’ criminal conduct.”