Wells Fargo & Co. has agreed to settle class-action lawsuits filed by various municipalities alleging bid-rigging by Wachovia’s municipal derivatives group, according to a securities filing Tuesday.
Wells Fargo, which acquired Wachovia in 2008, agreed to pay the larger amount of either $37 million or 65 percent of any restitution reached in any future accord with state attorneys general investigating Wachovia’s practices.
The settlement, which was reached Oct. 21, still needs court approval.
Wells spokeswoman Mary Eshet said the San Francisco-based bank was pleased to resolve the matter and noted the activities occurred before the merger.
Wells continues to cooperate with regulators in their ongoing investigation, Eshet said. The bank has said it has received subpoenas from the Justice Department, the Securities and Exchange Commission and state agencies.
Wachovia is one of a number of 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 a broker to seek out competitive bids for their investment contracts. The bidding process must meet Treasury rules that stem from the tax-exempt status of municipal bonds, which are monitored by the IRS.
The probe became public in 2007 when Bank of America reached a leniency agreement after self-reporting its activities.
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, bank spokesman Bill Halldin said.
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.
(Reporting by Rick Rothacker in Charlotte, North Carolina, editing by Dave Zimmerman.)
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