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Wachovia suits dismissed
Winston-Salem Journal (NC) - Friday, February 25, 2011
Author: RICHARD CRAVER ; JOURNAL REPORTER ; Winston-Salem Journal
A judge has dismissed two shareholder lawsuits against Wachovia Corp., including one in Forsyth County, in which the plaintiffs claimed they were misled by management during the bank’s collapse in 2008.
John Jolly Jr., the chief special Superior Court judge for complex business cases in N.C. Business Court, dismissed separate cases Wednesday that had been filed by five plaintiffs in Forsyth and three in Mecklenburg County.
The lawsuits were filed Oct. 1, 2009 — two days after the stunning announcement that Citigroup was going to buy Wachovia and nine days before Wells Fargo & Co. beat out Citigroup’s offer and bought Wachovia with the blessing of the Federal Deposit Insurance Corp.
Tony Plath, a finance professor at UNC Charlotte, estimated that about $1 billion in shareholder value vanished in the Carolinas from the Wachovia collapse.
Plath said he was not surprised by the judge’s decision.
“Basically, the Business Court is concluding that there’s no compelling reason that the plaintiffs should be treated any differently from any of Wachovia ‘s other shareholders, and we all lost a bunch of money from our equity experience at Wachovia ,” he said.
Both lawsuits had as defendants Wachovia and Wells Fargo, as well as Ken Thompson, the former chairman and chief executive of Wachovia , and Robert Steel , who succeeded Thompson as chief executive and was in charge when it was sold to Wells Fargo.
Also named as defendants were Thomas Wurtz, its former chief financial officer, and Donald Truslow, its former chief risk officer, who left as Wachovia declined in 2008.
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http://www.sec.gov/news/press/2011/2011-257.htm
Washington, D.C., Dec. 8, 2011
SEC Charges Wachovia With Fraudulent Bid Rigging in Municipal Bond Proceeds
Wachovia Agrees to $148 Million Settlement With SEC and Other Authorities
http://www.crainsnewyork.com/article/20111211/FINANCE/312119979
Municipal bonds’ seamy underside exposed
EXCERPT
The game worked like this: After cities or states sold bonds, they would hire brokers known as bidding agents to garner competitive bids from the banks, which would create vehicles to hold the proceeds until the municipality was ready to spend them. But instead of creating competitive auctions, the brokers would instead regularly collude with bankers, telling them just how much they needed to bid in order to win the business, in return for kickbacks.
In an example cited in an SEC lawsuit last week, a Wachovia banker asked if his $3.5 million offer for some business in New Jersey would be “embarrassing,” as in too high, and the bidding agent said it “might.” But when another party at the last minute indicated he would offer $5.25 million, the bidding agent warned that the bid was “a little high, and he should check his numbers to make sure ... he wasn’t ‘overpaying’.”
Wachovia won the deal with a $3.3 million bid, depriving the New Jersey issuer of $2 million in cash that it would have otherwise collected. Capping off the sorry episode, Wachovia later falsely certified that it had participated in a bona fide auction.
The amounts in the New Jersey example may be small, but the muni-bond market is huge and the corruption seems to have been rampant. The SEC said that Wachovia rigged at least 58 transactions between 1997 and 2005, involving $9 billion worth of municipal securities.
Expect to hear about more cases involving all of Wall Street’s big banks in the coming month