GPA to receive $5.1M from settlement
Guam - The Guam Power Authority is getting an early Christmas present this year - $5.1 million. Bank of America is paying out millions to agencies all over the country, including GPA, as part of a settlement agreement for misconduct related to insider deals.
The Guam Power Authority is slated to receive about the money in restitution from BOA as part of a settlement agreement for the bank's involvement in a conspiracy to rig bids in the municipal bonds derivative market. According to Consolidated Commission on Utilities chairman Simon Sanchez, Bank of America was a financial advisor for the Government of Guam during the Joe Ada and Carl Gutierrez administrations, and had handled the 1993 and 1999 GPA refinancing bonds.
Sanchez explained, "When you borrow money on the bond market, you don't spend it all at once so you have these large amounts of money that sit there and what you do is you invest them until you need to draw down when projects need money."
According to the Justice Department, Bank of America came forward and reported its own wrongdoing before the department began its investigation into anti-competitive conduct inside the industry. "They were supposed to invest this money and get the most money for the Guam Power Authority," the chairman said. "But apparently they didn't go out for straight forward bids. They went out for bids that they were basically awarding to their friends or someone's friends and a senior person at bank of America has pleaded guilty to, essentially, insider trading."
Bank of America has agreed to pay out a total of $137.7 million to various federal and state agencies and, because of its voluntary disclosure, will not have to pay penalties. Sanchez says that while Bank of America's actions may have cost GPA, this settlement makes up for that.
"To me, it's a positive no matter what," said Sanchez. "And usually when they do this they calculate what the interest rate should have been and they bring it forward all the way to today and I think in that $5 million is us recapturing all that lost investment. So, it's kind of like an extra savings account. There's $5 million we should have had 17 years ago or 11 years ago. We have it now with interest and now we can use it."
GPA executives are currently looking into the laws and bond agreements to determine how the money can be used - whether for capital improvement projects, operations, or to pay off loans. A report on that is expected during next week's CCU meeting.