ALERT 99-8
Type: Fraudulent Investment Programs
Subject: Fraudulent Municipal  Finance Programs
Date: July 26, 1999

TO:  Chief Executive Officers of all National Banks; all State
     Banking Authorities; Chairman, Board of Governors of the
     Federal Reserve System; Chairman, Federal Deposit Insurance
     Corporation; Conference of State Bank Supervisors; Deputy
     Comptrollers (Districts); Assistant Deputy Comptrollers;
     District Counsel and Examining Personnel


RE:  Enhanced Scrutiny of Proposals to Municipalities to fund
     projects at zero cost or to provide additional yields on
     existing investment portfolios through secondary market
     activities.

     The OCC is aware of several proposals currently being
     promoted to assist municipalities to obtain grants or fund
     long-term projects at no or little cost to the municipality. 
     Additional proposals have come to our attention which
     purport to be able to leverage current investment portfolios
     through secondary market activities to generate additional
     high yields at no risk to the original investment.  These
     types of proposals, which are known to us from previous
     situations, have no financial validity and may place the
     municipality at extreme financial risk and reputation risk.

     The scenarios currently being proposed may utilize deposit,
     trust, or safe keeping accounts at major financial
     institutions which are stated to be totally under the
     municipality's control at all times.  Control of the account
     is not assured due to the following:  ambiguous wording in
     the documentation; changes in the program immediately prior
     to or after start-up; or, other seemingly insignificant
     events that will provide the opportunity for access by
     persons other than the authorized municipal employees. 
     Also, requests for municipal account custodians to enter
     into transactions that are not in accordance with
     established control practices are common.  The request is
     usually based on some type of situation requiring immediate
     action to protect the investment or take advantage of a
     unique investment opportunity.   

     These programs appear to be "to good to be true."  They are. 
     Do not confuse them with the legitimate programs to assist
     municipalities and to provide legitimate investment
     performance improvements.  


We strongly suggest that you exercise extreme caution to ensure
that the proposals presented to you are legitimate by:

     1.   obtaining directly verifiable references from the promoters; and, 

     2.   verifying the facts presented with reputable investment
           advisors and banks known by you.

     Any information which you may have concerning this matter
     should be brought to the attention of:

               Enforcement & Compliance Division
               Office of the Comptroller of the Currency
               250 E Street, SW   
               Washington, DC 20219
               (202) 874-4800   Fax (202) 874-5301




                                                  
Daniel P. Stipano
Director
Enforcement & Compliance Division