A trio of former financial executives from General Electric are headed to prison after being found guilty of defrauding taxpayers in the municipal bond market.

The men are the first to be sentenced as part of the government's ongoing investigation of bid-rigging in auctions for the investment of municipal bond proceeds by some of Wall Street's biggest firms. The probe has yielded 20 indictments so far, with defendants coming from institutions including Bank of America (BAC), JPMorgan (JPM) and UBS (UBS).

The three men sentenced Thursday formerly worked at General Electric's (GE) GE Capital unit, where prosecutors say they colluded with counterparts at other firms to rip off bond issuers. Two men -- Dominick Carollo and Peter Grimm -- received three years in prison, while the third, Steven Goldberg, got four years.

Prosecutors had requested 10 years in prison for Carollo, as well as up to 12 years for Grimm and 17 for Goldberg.

How the scheme worked: When states and local governments issue bonds, they usually don't spend all the proceeds right away. To figure out how to invest the extra money, they hire brokers who manage a bidding process among financial institutions competing for their business.

Bids are solicited from firms like UBS and JPMorgan, which submit the interest rates they're willing to offer on the extra bond proceeds. The winning institution, generally, is the one that offers the highest rate of return.

In cases like that of the former GE executives, prosecutors say the process was corrupted when executives from different firms conspired with one another, dividing up business in advance and devising their bids in cooperation, a practice known as bid-rigging. This allowed the winning bidders to offer issuers lower rates of return than they would have secured through an honest process.

Related: Bankers nabbed in bid-rigging scandal

"Quite simply, the defendants stole money from taxpayers and conspired to manipulate the competitive bidding system to benefit themselves instead of the towns and cities that needed this money for important public works projects," Richard Weber, head of the IRS's criminal division, said in a statement. The three men helped rig dozens of bidding processes, the government says, costing municipalities around the country millions of dollars.

John Siffert, a lawyer for Goldberg, said he planned to appeal.

Attorneys for the other two defendants did not respond to requests for comment. A GE Capital spokesman declined to comment.