By Bernard Vaughan
NEW YORK (Reuters) - Former UBS AG banker Peter Ghavami was sentenced to 18 months in prison on Wednesday for his role in deceiving U.S. municipalities by rigging bids to invest municipal bond proceeds, a much shorter sentence than prosecutors had sought.
U.S. District Judge Kimba Wood also ordered Ghavami, a Belgian national and the former global head of commodities at UBS, to pay a $1 million fine.
Ghavami, 45, was the first of three former members of UBS' municipal securities desk to be sentenced in federal court in New York on Wednesday for their role in the scheme. The others, former vice presidents Gary Heinz and Michael Welty, await sentencing.
"I've always tried to conduct my life with integrity and consideration," Ghavami told Wood, before apologizing to affected municipalities and his wife, Julie, and daughter, Athena. "All I want to do is to protect Julie and Athena from harm and to get to the point where we can be a family again."
Prosecutors said the bankers steered financial contracts to their friends in exchange for kickbacks and other favors between 2001 and 2006, while falsely certifying that the processes were competitive.
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A federal jury convicted all three last August of conspiring to defraud municipal bond issuers, and also convicted Ghavami and Heinz of wire fraud. UBS agreed in 2011 to pay $160 million in restitution, penalties and disgorgement for the scheme.
Prosecutors were seeking much higher prison sentences for all three, including at least 17-1/2 years for Ghavami. Kalina Tulley, an attorney with the Department of Justice's antitrust division, called Ghavami the "architect" of the scheme.
"These were municipalities that were looking to invest the taxpayers' money," Tulley told Wood. "These defendants abused that trust."
But Wood cut the range of Ghavami's potential sentence, in part because he will not be eligible to serve time in a federal camp, like his fellow defendants; because he will be deported to Belgium after serving his sentence; and because the victims have been made whole by the UBS settlement.
A smiling Ghavami declined to comment after his hearing. But his lawyer, Charles Stillman, said, "We're very pleased at the outcome and we feel that justice was done."
The U.S. Department of Justice charged Heinz, Ghavami and Welty in 2010 as part of its broad investigation of the $3.7 trillion U.S. municipal bond market, in which at least 19 people have been convicted or pleaded guilty.
The case is U.S. v. Ghavami et al, U.S. District Court, Southern District of New York, No. 10-cr-01217. (Reporting by Bernard Vaughan; Editing by Dan Grebler)