The Beverly Hills financial advisory firm at the center of the investigation that derailed New Mexico Gov. Bill Richardson's hopes of becoming commerce secretary has had a series of run-ins with federal and state agencies -- and a growing list of former clients is now suing it for allegedly bilking local governments.
CDR Financial Products Inc. and its owner, David Rubin, are the subjects of continuing investigations by the Securities and Exchange Commission, the Internal Revenue Service and the U.S. Department of Justice, which became public when investigators searched CDR's offices in November 2006.
Rubin developed a niche helping state and local governments earn money on the cash raised through bond issues. Governments typically receive a lot of money from investors upfront, which can't be spent all at once. Rubin's firm advises governments on how to invest that money before it is spent on projects.
But about 20 different cities, counties and school districts are now suing Rubin's firm, alleging it steered them to banks that paid CDR kickbacks.
CDR's spokesman, Allan Ripp, disputed the allegations and said the company has always done what it's paid to do: provide sound financial advice.
"We want to emphasize that in all of these investigations and the leaks of the investigations there has never been a question of competence or performance or even ultimate value," Ripp said.
CDR is just one of many defendants in the lawsuits by local governments, which also name banks such as Bear Stearns Cos., Lehman Bros. Holdings Inc. and Bank of America Corp.
"CDR has not been a household name like Lehman and Bank of America and JP Morgan but they were integral and intertwined in the whole scheme," said Nanci Nishimura, a partner at law firm Cotchett Pitre Simon & McCarthy in Burlingame, Calif. "A lot of what we know about how these big banks were doing business was triggered by the FBI's raid on CDR's offices."
Rubin, 47, is an entrepreneur who was born in Mexico City to Israeli parents. They later moved to the Los Angeles area, where Rubin graduated from an Orthodox Jewish school. He never graduated from college but did earn a financial advisor's license before starting his own firm in 1986.
CDR was initially called Chambers, Dunhill & Rubin. But there were no partners named Chambers or Dunhill. Ripp said the names were added to make the one-man shop sound more established.
