Massachusetts' AG's Auction-Rate Probe Results in UBS Paying $1 Million to State and $35 Million to Towns & Cities

UBS agreed to pay Massachusetts $1 million to settle an investigation by Attorney General Martha Coakley into the marketing of auction-rate securities to 20 towns and public agencies in the state.  In addition to paying the state $1 million, the Agreement calls for UBS to return $35 million to towns and cities that invested in the securities.  The investigation, which began in February, was initiated to determine whether UBS misled governments by selling them securities that weren't a ``permissible investment'' under state law.    

Coakley’s investigation is separate from the civil suit filed by Secretary of State William Galvin, who last month accused UBS of fraud in the sale of auction-rate securities.  Secretary Galvin’s lawsuit accuses UBS of fraud in the sale of auction-rate securities to private investors who are residents of Massachusetts.  Specifically, the Galvin lawsuit alleges that, among other things, that UBS boosted efforts to sell ARS even as it knew the market for them was collapsing.  In addition, the Galvin suit alleges that UBS told investors that the long-term bonds were cash equivalents when the bank knew they weren't.