Wells Fargo settles with Sarasota over securities lending feud
17 December 2012 Sarasota
Image: Shutterstock
Wells Fargo will pay Sarasota County $23.75 million to settle claims that Wachovia Bank, which it acquired at the peak of the financial crisis, mismanaged the county’s securities lending portfolio between 2007 and 2008.
Sarasota County’s clerk of court and comptroller, Karen Rushing, filed a complaint against Wachovia in 2010.
Rushing engaged Wachovia in 2006 to enhance the performance of the county’s working capital, but the financial crisis hit in 2008.
Sarasota County alleged that Wachovia negligently invested county funds in Lehman Brothers bonds and a collateralised debt obligation from Altius Funding.
Rushing argued that Wachovia failed to follow the county’s extremely conservative investment guidelines when it invested in Lehman Brothers and Altius.
Wells Fargo assumed the liabilities of Wachovia when it acquired the bank at the end of 2008. It denied the allegations.
The case was scheduled for trial in federal court this month, but the parties have now agreed to settle. In a statement, Rushing said: “I think this is a very good settlement. The settlement resolves the litigation and brings in almost $24 million for the citizens of Sarasota County.”
In a statement, a Wells Fargo spokesperson said that the terms of the settlement agreement will see both parties "making payments to cover losses incurred in the securities lending programme during a time of unprecedented market conditions".
"We strongly believe that the investments made by Wachovia on behalf of its clients in the securities lending programme were in accordance with investment guidelines and were prudent and suitable at the time of purchase. The firm was focused at all times on serving our clients’ interests and we worked very hard and responsibly to achieve the best results for all of the participants in the securities lending programme, during very difficult economic conditions."
"In reaching this settlement with the County of Sarasota, we look forward to putting the matter behind us and focusing on helping our clients navigate the continued challenging market environment."
The bank continues to incur litigation costs since it took over Wachovia. In March, the City of St Petersburg persuaded a jury in Tampa, Florida, that Wachovia acted improperly when the city lost $10 million in Lehman Brothers bonds.
Wells Fargo is currently appealing against that decision, but in the same month—unrelated to Wachovia—a Michigan pension fund filed a suit against the bank alleging that it mis-sold the safeness of its securities lending programme.
Speaking at the time, a spokesperson denied the allegations and said the bank would vigorously defend itself.
Sarasota County’s clerk of court and comptroller, Karen Rushing, filed a complaint against Wachovia in 2010.
Rushing engaged Wachovia in 2006 to enhance the performance of the county’s working capital, but the financial crisis hit in 2008.
Sarasota County alleged that Wachovia negligently invested county funds in Lehman Brothers bonds and a collateralised debt obligation from Altius Funding.
Rushing argued that Wachovia failed to follow the county’s extremely conservative investment guidelines when it invested in Lehman Brothers and Altius.
Wells Fargo assumed the liabilities of Wachovia when it acquired the bank at the end of 2008. It denied the allegations.
The case was scheduled for trial in federal court this month, but the parties have now agreed to settle. In a statement, Rushing said: “I think this is a very good settlement. The settlement resolves the litigation and brings in almost $24 million for the citizens of Sarasota County.”
In a statement, a Wells Fargo spokesperson said that the terms of the settlement agreement will see both parties "making payments to cover losses incurred in the securities lending programme during a time of unprecedented market conditions".
"We strongly believe that the investments made by Wachovia on behalf of its clients in the securities lending programme were in accordance with investment guidelines and were prudent and suitable at the time of purchase. The firm was focused at all times on serving our clients’ interests and we worked very hard and responsibly to achieve the best results for all of the participants in the securities lending programme, during very difficult economic conditions."
"In reaching this settlement with the County of Sarasota, we look forward to putting the matter behind us and focusing on helping our clients navigate the continued challenging market environment."
The bank continues to incur litigation costs since it took over Wachovia. In March, the City of St Petersburg persuaded a jury in Tampa, Florida, that Wachovia acted improperly when the city lost $10 million in Lehman Brothers bonds.
Wells Fargo is currently appealing against that decision, but in the same month—unrelated to Wachovia—a Michigan pension fund filed a suit against the bank alleging that it mis-sold the safeness of its securities lending programme.
Speaking at the time, a spokesperson denied the allegations and said the bank would vigorously defend itself.
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