San Francisco, Sept. 16 (Bloomberg) -- Citigroup Inc.,
Merrill Lynch & Co. and seven other financial companies that trade
municipal bonds were sued for charging customers excessive fees
for buying or selling the securities.
Kevin Olson, a former trader and founder of a bond-data Web
site, alleged that some fees charged by bond brokers violate
California's Unfair Competition Act. In a suit filed ``on behalf
of the general public'' in San Francisco County Superior court, he
also sued Morgan Stanley, Bear Stearns Cos. Inc., UBS PaineWebber
Inc., Prudential Securities Inc., Charles Schwab & Co., U.S.
Bancorp and Bank of America Corp.
``We're trying to increase market visibility and make sure
brokers charge fair fees,'' said Stan Mallison, a San Francisco
lawyer who represents Olson, founder of MunicipalBonds.com.
Olson's complaint claims that alleged improper bond-trade
profits totaled ``at least tens if not hundreds of millions of
dollars.''
`Many of these fees are thousands of dollars despite the fact
that municipal brokers' costs for these near riskless transactions
are minimal,'' Olson said in a press release distributed Business
Wire.
Citigroup spokesman Dan Noonan didn't return telephone calls
seeking comment. Morgan Stanley spokeswoman Judy Hitchen declined
to comment. UBS spokesman Paul Marrone didn't immediately return a
call seeking comment. Merrill spokesman Michael Duvally said he
may comment later. A spokesman for Bear Stearns was unavailable
for comment. The rest of the banks declined comment.
An Investor Guide
Olson's Web site repackages data issued by the Municipal
Securities Rulemaking Board, a panel that issues rules and
regulations on registering municipal bonds. The board began
collecting information in 1994 on municipal-bond trades, including
prices dealers pay for bonds and what they charge their customers.
The information, designed to help investors calculate the
worth of their holdings, is available on a next-day basis for
bonds that trade three or more times a day.
Olson's Web site assigns a ``red flag'' when trades on the
same bond vary by more than four percent of the security's face
value in a single day.
The banks improperly charged customers markups as high as
five percent on secondary market sales involving low-risk, AAA and
AA bonds in the last four years, according to Olson's complaint.
He also charges that the banks failed to disclose information
about profits from such sales.
