Wells Fargo & Co. has agreed to settle class-action lawsuits filed by various municipalities alleging bid-rigging by Wachovia’s municipal derivatives group. Wells Fargo, which acquired Wachovia in 2008, agreed to pay the larger amount of either $37 million or 65% of any restitution reached in any future settlement with state Attorneys General investigating Wachovia’s practices. The settlement must have court approval.
Wells Fargo noted the activities occurred before the merger and that the San Francisco-based bank continues to cooperate with regulators in their ongoing investigation. Wells Fargo said it received subpoenas from the Justice Department and the Securities and Exchange Commission, as well as from state agencies.
Wachovia is only one of several banks caught up in a sweeping investigation of the municipal derivatives business. In the past year, Bank of America Corp JPMorgan Chase & Co. and UBS AG have reached settlements with the U.S. Justice Department and state Attorneys General over allegations that their employees manipulated the bidding process for contracts used to invest the proceeds from bond offerings. The settlements have included more than $500 million in restitution and penalties.
Municipalities and other public agencies often invest money from municipal bond offerings because all the money isn’t spent at once. The municipalities hire brokers who seek out competitive bids for their investment contracts. But the bidding process has to meet Treasury rules because of the tax-exempt status of municipal bonds. Of course, they are monitored by the IRS. The investigation became public in 2007. At that time Bank of America self-reported its activities and reached a settlement.
Bank of America continues to face a pending class-action lawsuit. The bank has allocated $62.5 million to pay municipalities as part of its $137 million settlement. JPMorgan also faces a pending class-action suit. Morgan Stanley in August agreed to pay $6.5 million to settle class-action claims against the investment bank.
Source: Insurance Journal
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.