WASHINGTON (AP) &<51; A politically connected financial firm and two of its executives were indicted Thursday for what prosecutors say was a bid-rigging scheme in the municipal bond business.

The charges in the nine-count indictment filed Thursday in Manhattan federal court against CDR Financial Products are the first resulting from the Justice Department&S217;s inquiry of the municipal bonds industry. CDR, based in Beverly Hills, Calif., has also come under scrutiny for its ties to Gov. Bill Richardson of New Mexico.

The indictment accuses two CDR executives and one former executive from the firm of engaging in bid-rigging conspiracies in which CDR was hired by public entities that issue municipal bonds to act as their broker and conduct a supposedly competitive bidding process.

&S220;This case is fundamentally about collusion, the illegal rigging of a purportedly competitive bidding process,&S221; said Joseph Demarest, head of the FBI&S217;s New York office.

The result of the scam, Mr. Demarest said, was less money for the states, cities and counties that hired CDR.

CDR is also known as Rubin/Chambers, Dunhill Insurance Services Inc.

Prosecutors said that CDR&S217;s company&S217;s owner and president, David Rubin, vice president Evan Zarefksy and former chief financial officer Zevi Wolmark took part in two wire fraud schemes. The three are also charged with obstructing the Internal Revenue Service faxless pay day loans.

Because such bonds are tax-exempt, the competitive bidding process is regulated by the I.R.S.

Prosecutors said the company secretly manipulated the bidding process to enrich themselves and the bidding companies at the expense of the municipalities, the I.R.S. or both.

Under the scheme, CDR would arrange in advance which company would win a particular bid for bond business and arrange kickbacks to CDR in the form of inflated fees, authorities said.

In one 2006 state bond deal, one of the bidders agreed to pay CDR a $475,000 kickback, according to the indictment.

The municipal bond business is huge: In 2007 and 2008, about $800 billion worth of municipal bonds were issued across the country.

If convicted of the most serious charge against them, the three men face a maximum prison sentence of 20 years.

Mr. Rubin&S217;s lawyer Donald Etra said the government had &S220;no basis&S221; for the charges.

&S220;The bottom line is that David Rubin has done nothing wrong,&S221; Mr. Etra said. &S220;He&S217;s a brilliant businessman and a prominent philanthropist.&S221;

Lawyers for the other two men could not immediately be located.

3 Accused of Bid-Rigging in Municipal Bonds Sales