Three former General Electric bankers defrauded cities and the Internal Revenue Service in a bid-rigging scheme involving municipal bonds, a prosecutor told jurors at the start of a fraud trial yesterday in Manhattan federal court.

Dominick Carollo, Steven Goldberg and Peter Grimm face charges of conspiracy to commit fraud by manipulating auctions for municipal bonds.

The government claims that between August 1999 and November 2006 the men gave kickbacks to brokers hired by local governments to solicit bids, to win auctions and increase their profits.

The charges grew out of a five-year investigation by federal antitrust prosecutors into the $3.7 trillion municipal bond market.

In December, GE agreed to pay $70.4 million to resolve its part of the investigation. The defendants deny any wrongdoing.