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In the municipal bond market, some investment banking firms engaged in fraudulent schemes known as “yield-burning,” where they charged excessive prices for U.S. Treasury securities sold to municipalities in connection with certain types of tax-exempt bond refinancings.

These refinancing transactions — known as “advance refundings” — permitted municipalities to refinance their debt at lower interest rates when interest rates decline, and therefore lower their borrowing costs.

More than two dozen Wall Street investment banking firms – including Goldman Sachs & Co., Paine Webber Inc., Prudential Securities Inc. and Merrill Lynch Pierce Fenner & Smith Inc. – paid more than $200 million to settle a qui tam lawsuit brought by former investment banker Michael Lissack and related federal and state charges for yield burning. Lissack, represented by Phillips & Cohen, first exposed the Wall Street practice of yield burning, which the government had not known was being done.

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