Updated from 4:44 p.m. EDT

Two officials of

Commerce Bancorp

(CBH) - Get Report

, the fast-growing New Jersey bank, were among 12 people indicted Tuesday in an influence-peddling probe of the Philadelphia treasurer's office that involved the awarding of municipal bond work.

Commerce's shares were halted for trading at $60.95, down $3.51, or 5.45%.

Also indicted were two former

J.P. Morgan Chase

(JPM) - Get Report

bank officials and a former senior vice president of

Janney Montgomery Scott

.

The two Commerce officials are executives with the bank's Pennsylvania subsidiary. The indictment, handed up Tuesday by a federal grand jury, identifies the two men as Glenn Holck, president of Commerce Bank/Pennsylvania and Stephen Umbrell, a bank regional vice president.

The indictment charges that the two bank executives extended special loans to Corey Kemp, a former Philadelphia city treasurer, even though the politician had an extremely poor credit rating. In return, Kemp allegedly gave preferential treatment to Commerce Bank in the award of a $30 million line of credit and in other business.

In a statement, Commerce said the two men, who were immediately suspended, are not executive officers of the parent company.

"The company has confirmed that neither it nor any of its subsidiaries or other officers and employees are targets of the investigation," Commerce said. "The company believes that this will have no material negative financial impact on the company."

A J.P. Morgan spokesman said the bank is cooperating with the investigation.

The charges against the Commerce officials stems from a sweeping municipal corruption investigation in Philadelphia by Eastern District of Pennsylvania U.S. Attorney Patrick Meehan. The indictment alleges that from January 2002 through October 2003, a local attorney, Ronald White, used illegal gifts and payments to gain influence over Kemp, who made decisions about the hiring of financial services firms to do municipal bond work.

"This is an indictment not only of the defendants but of a 'pay to play' culture that can only breed corruption," says Meehan.

The lengthy investigation became public earlier this year when it was discovered that the Federal Bureau of Investigation had planted a bug in the office of Philadelphia Mayor John Street. While White and Kemp are supporters of Street, the Philadelphia mayor was not charged with any wrongdoing.

The indictment charges that White, the attorney, gave Kemp instructions "regarding which firms to select as underwriters for bond issuances."

Prosecutors allege that one of the underwriters favored by White was Commerce Capital Markets, a division of Commerce Bank. Other favored banks included J.P. Morgan Chase, Janney Montgomery Scott and two unidentified financial institutions.

The indictment says White referred to this group of companies as his "network."

White, according to the indictment, received a monthly retainer or consulting fee from Commerce starting in 2000. The fees, which began at $10,000 a month, eventually totaled $182,000. He was named to the subsidary's board in 2002.

Commerce Capital Markets earned $1.5 million in bond underwriting fees from the city over a three-year stretch. Only two of the 40 investment banks Philadelphia used on bond deals earned more.

The indictment also says that Janney Montgomery Scott and J.P. Morgan Chase, which also did bond work for Philadelphia, had ties to White. Prosecutors allege that White "advocated" on both banks' behalf and that White "received benefits" from the two financial institutions.

The other former bank officials named in the indictment are Denis Carlson, a former senior vice president at Janney Montgomery Scott; Charles LeCroy, a former J.P. Morgan managing director of the bank's southeast regional office; and Anthony Snell, a former J.P. Morgan vice president.

Prosecutors allege that the former J.P.Morgan officials, who were in charge of developing business in the Philadelphia area, cultivated a relationship with White. They allegedly arranged for the bank to pay White $50,000 for work he did not perform and got the bank to donate money to the Ronald A. White Scholarship Fund at Wesleyan University.

The payments to White apparently did the trick. The indictment charges that prior to its relationship with White, J.P. Morgan did scant business with Philadelphia. But with White and Kemp's help, it started receiving bond work.