Ex-Lazard partner convicted of fraud Jury says Ferber wronged clients by not disclosing terms


BOSTON -- Former Lazard Freres & Co. partner Mark Ferber yesterday was convicted of fraud and bribery as a federal jury determined Ferber wronged his municipal clients by failing to disclose the financial terms of a fee-splitting contract with Merrill Lynch & Co.

The decision was the highest profile victory for prosecutors in the government's crackdown on unethical practices in the $1.3 trillion municipal bond market, and adds impetus to the Securities and Exchange Commission's investigation of Ferber. He may also be banned from the securities industry.

It capped a trial that began more than two months ago with federal prosecutors branding Ferber as a schemer whose greed motivated him to hide the financial terms of the contract from the clients he served as a financial adviser. Ferber testified, to no avail, that he had disclosed all he was allowed to divulge under the contract with Merrill.

The government's effort to clean up the industry has resulted in the elimination of questionable habits such as using political donations to influence the awarding of bond business. Yesterday's government victory, along with stricter regulations, should help to eradicate other dubious practices, market participants said.

"While the [trial] was occurring people were probably watching themselves a little closer, so that's already been taking place," said Bob Zubak, who manages about $16 billion in munis at Allstate Insurance Corp. in Northbrook, Ill.

"It's a smashing win for the government, a definite reversal of the way it seemed to be going," said Alan Bromberg, a professor at Southern Methodist University who specializes in securities law and followed the trial. "The SEC will be glad to have an example of corruption in the muni industry they are always complaining about."

In June, a federal jury in New York acquitted municipal financial adviser Nicholas Rudi of kickback charges. Jurors said afterward that Rudi's municipal clients in New Jersey didn't suffer economic harm, an argument Ferber also pursued.

Merrill and Lazard weren't charged in the proceedings.

In October, Merrill and Lazard agreed to pay $24 million to settle charges they failed to fully disclose the arrangement. The cash settlement was the largest ever in the municipal bond market.

A Merrill spokesman declined to comment.

Ferber, the former influential investment banker and lawyer, was convicted on 33 of 36 counts of fraud and all 25 counts of bribery in connection with violations of the federal travel act. Federal prosecutors charged Ferber traveled or caused others to travel to violate Massachusetts state gratuity laws.

Ferber, a 43-year-old resident of Concord, Mass., and father of four, faces a maximum of five years in prison on each count plus fines based on a calculation of the financial harm caused to his clients. Sentencing is scheduled for Nov. 4.

U.S. District Court Judge William Young, in accepting the decision, told Ferber that "as a convicted felon, you are disbarred" in federal court in the commonwealth of Massachusetts. Ferber entered and left the courtroom with no emotion, accompanied only by his lawyers.

Thomas Dwyer Jr., Ferber's defense attorney, said his client planned to file an appeal. Dwyer said he will file for a third time a motion to acquit, with a hearing expected next month. A formal appeal will be filed after the sentencing, he said.

Federal prosecutors said Ferber committed fraud and bribery by failing to tell his clients about the money being paid by Merrill Lynch while steering their business to Merrill in return for about $2.5 million over three years.

Pub Date: 8/10/96

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