WASHINGTON -- Wachovia Bank NA, currently Wells Fargo & Co., has reached a tentative settlement of a class action suit with municipal issuers over antitrust charges of bid-rigging for municipal investment, derivatives and other contracts.
Under the settlement — which was reached on Oct. 21 with the attorneys for the issuers but still must be approved by a federal judge in New York — Wells Fargo would pay the greater of $37 million or 65% of restitution of any future settlement with the state attorneys general. The state AGS have been conducting their own investigation of bid-rigging.
“We are pleased to resolve this legacy of Wachovia matter, which relates to events that occurred prior to the Wells Fargo merger,” said Mary Eshet, a Wells Fargo spokeswoman.
Eshet says the settlement does not resolve other ongoing investigations.
“Wells Fargo continues to cooperate with regulators as the investigations proceed,” she said.
The Justice Department, Securities and Exchange Commission, banking regulators and state attorneys general have been conducting criminal and civil investigations of most of the major Wall Street firms over bid-rigging in the muni market. The Justice Department probe has been ongoing since 2005.
Federal regulators have already reached settlements of criminal and civil charges with Bank of America Securities LLC, now Bank of America Merrill Lynch, which last December agreed to pay about $138 million; UBS Financial Services Inc., which agreed in May to pay about $160 million; and JPMorgan Chase & Co., which said in July that it would pay $228 million.
Attorneys representing the issuers in this tentative settlement with Wells Fargo, which includes Hinds County, Miss., said they will send a notice to municipalities to see if they want to participate in the pact once the court approves it.
For Wells Fargo, the settlement would end a lawsuit that was first filed against it and some three dozen other broker-dealers and banks in March 2008, but was revised and refiled in June 2009. The suit was consolidated with other issuer suits and is pending in the U.S. District Court for the Southern District of New York in New York City.
Wells Fargo would be the second firm to settle with the issuers. Earlier this year, Morgan Stanley agreed to pay $6.5 million to settle charges with Hinds County and other issuers in the class action suit.
-- This article first appeared on The Bond Buyer.