Opinion and Order
In this criminal case defendant Nicholas Rudi, a former financial consultant in New Jersey to the Camden County Municipal Utilities Authority ("CCMUA"), was charged with obtaining a kickback from First Fidelity, N.A., a lead underwriter on a public offering of CCMUA bonds in 1990 (the "Bond Issue"). At the close of the government's case, he moves for dismissal of count five of the indictment. Both sides agree there is no legal authority directly in point.
From the evidence one could conclude that First Fidelity surreptitiously paid Rudi the difference between the much larger fee he had received in the past for his work on CCMUA bond issues--one dollar per $ 1000 face amount issued (or "a buck a bond")--and the $ 15,000 he was entitled to receive from the CCMUA under a new and different fee arrangement made in 1989.
First Fidelity paid to Rudi, through intermediaries, over $ 200,000 under the kickback arrangement. Count five has nothing to do with that payment.
After the 1990 Bond Issue had closed, the First Fidelity officer who had made the earlier payment mistakenly thought that Rudi was owed an additional $ 22,000 under the kickback agreement. To justify that, about two months after the closing Rudi sent First Fidelity a false invoice (the "Invoice"), purportedly for work connected with an entirely unrelated bond issue in which he had not participated, and First Fidelity paid him the additional $ 22,000. Thus, First Fidelity's records regarding that payment misrepresented its nature and purpose.
Count five of the indictment charges Rudi with aiding and abetting First Fidelity's violation of section 15B(c)(1) of the Exchange Act of 1934 with respect to the $ 22,000 payment.
Section 15B(c)(1) provides:
No broker, dealer, or municipal securities dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce or attempt to induce the purchase or sale of, any municipal security in contravention of any rule of the [Municipal Securities Rulemaking] Board.