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Firms to pay $386 million to settle price-fixing allegations

HARRISBURG, Pa. — Thirteen large financial firms are agreeing to pay $337 million to settle claims by Pennsylvania’s treasury department and about a dozen other government agencies and pension funds accusing them of inflating the price of bonds issued by Fannie Mae and Freddie Mac over seven years, according to proposed agreements filed in federal court.

If approved, the agreements filed late Monday would bring to $386 million the amount paid by 16 financial firms that Pennsylvania Treasurer Joe Torsella, the lead plaintiff, and officials in other states accused of price fixing in the secondary market for bonds issued by government-controlled companies.

Pennsylvania’s lawsuit consolidated claims by various government agencies and labour unions, including the city of Baltimore and pension systems in St. Louis, Oklahoma, Puerto Rico and Birmingham, Alabama.

The bonds are a cornerstone for the investment portfolios of government and institutional investors, and Torsella’s office said a large number of them likely were victims of the conspiracy. It estimated their losses at around $850 million. Those investors will be able to apply to recoup money from the settlement.

The case was aided by evidence from a “co-operating co-conspirator” in a U.S. Department of Justice antitrust investigation, and filings included brief transcripts of what were said to be online “chats” by traders at firms agreeing to fix bond prices.

Under one settlement filed Thursday night in federal court in New York, Barclays would agree to pay $87 million. Under a second agreement filed simultaneously, $250 million total would be paid by 12 other banks: BNP Paribas, Cantor Fitzgerald, Citigroup, Credit Suisse, HSBC, JP Morgan, Merrill Lynch, Pierce, Fenner & Smith, Morgan Stanley, Nomura, SG Americas, TD Securities and UBS.

The court gave preliminary approval in October to a settlement with Goldman Sachs and First Tennessee Bank and last week to a settlement with Deutsche Bank.

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Marc Levy, The Associated Press