$148M is latest Wells Fargo payout

Settlement will resolve Wachovia's participation in a bid-rigging scheme.

adunn@charlotteobserver.comDecember 9, 2011 

Wells Fargo & Co. and regulators announced Thursday a $148 million settlement to resolve accusations that the bank's predecessor Wachovia participated in a bid-rigging scheme that cost local governments.

It's the fourth major bank to settle with a consortium of federal agencies and state attorneys general. Bank of America Corp. settled for $137 million last December. The settlement is the second Wells Fargo has reached on the issue in as many months.

"Wachovia won bids by playing an elaborate game of 'you scratch my back and I'll scratch yours,' rather than engaging in legitimate competition to win municipalities' business," Securities and Exchange Commission enforcement division director Robert Khuzami said in a news release.

In the settlement, Wachovia admits responsibility for illegal activity by employees between 1998 and 2004, the U.S. Department of Justice said. The Charlotte-based bank was acquired by Wells Fargo in 2008.

Wells Fargo said in a statement that it "cooperated fully" with the investigation and does not condone illegal activity.

"We're really pleased to resolve the issue," Wells spokeswoman Dana Obrist said, noting that it involved activity that predated Wachovia's acquisition by Wells. She said none of the employees involved are still with the bank.

The federal agencies alleged that a group of large banks conspired to defraud local governments and other entities that bought municipal derivatives, which are used to invest money from bond proceeds until they are needed for public projects. Bankers coordinated what they would bid on the contracts, and in some cases paid kickbacks to one another, investigators said.

JPMorgan Chase & Co. settled similar charges for $228 million in July. UBS AG settled in May for $160 million.

The Justice Department said its ongoing investigation has yielded criminal charges against 18 former executives across several banks. Nine of them have pleaded guilty. Details on those cases were not immediately available.

The $148 million from Wells Fargo will be divided among a number of federal agencies and 26 attorneys general, including North Carolina's Roy Cooper and South Carolina's Alan Wilson. Much of it will be paid to the local governments and other entities affected.

Of the more than $58 million designated to the attorneys general, $2 million will go to entities in North Carolina that entered into contracts with Wachovia between 1998 and 2004, Cooper's office said. Those include the city of Charlotte and the Mooresville Graded School District.

"Rigging the system to prevent fair competition cost taxpayers, local governments and schools millions of dollars," Cooper said in a statement. "I'm pleased that we've been able to win money back for those who were harmed ...."

Wells Fargo announced a similar settlement last month with a number of local governments that brought a civil lawsuit against Wachovia and other banks. Pending court approval, the bank will pay $37 million to settle the suit.

Obrist said the bank expects Thursday's settlement to be its last on the matter.

Dunn: 704-358-5235

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