Wells Fargo will pay $148.2 million to settle federal and state charges that it rigged dozens of bidding competitions to win business from cities and counties.
The U.S. Department of Justice, along with the federal and state regulators, had been investigating the actions of employees at Charlotte, N.C.-based Wachovia Bank, which Wells Fargo Co. acquired in 2008.
The Securities and Exchange Commission said Wachovia generated millions of dollars in illicit gains during an eight-year period when it fraudulently rigged at least 58 municipal bond transactions in 25 states and Puerto Rico.
“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,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.
Banks help states and municipalities raise money for projects like building roads and schools by selling bonds to investors. Portions of those proceeds may not be spent immediately, and banks will help the municipalities invest those funds until they’re needed. The SEC said the banks rigged the bidding process for some of those investments, forcing the municipalities to pay prices for securities that were above fair market value.
The SEC said Wachovia won some bids through a practice known as “last looks,” in which it obtained information from agents about competing bids. It also won bids through “set-ups,” in which the bidding agent deliberately obtained non-winning bids from other providers in order to rig the field in Wachovia’s favor.
As part of the settlement, Wells Fargo will pay the Securities and Exchange $46.1 million; the Office of the Comptroller of the Currency will be paid $34.5 million; the Internal Revenue Service gets $8.9 million; and a group of state Attorneys General will be paid $58.75 million.
Wells Fargo settled a separate civil case in federal court in New York last month over similar allegations. The bank paid $37 million to settle that case, which had been brought by several states.
The San Francisco bank said in a statement that it was pleased to have resolved the matter. It noted that the transactions in the case had been done by employees who are no longer with the company. Wells Fargo said the payments wouldn’t have an adverse effect on its financial results. Wells Fargo has $1.3 trillion in assets.
Wells is not the only bank to settle similar fraud charges brought by federal and state authorities over rigging municipal bond bidding.
In July, a unit of JPMorgan Chase agreed to pay $228 million to settle civil fraud charges that it rigged dozens of bidding competitions to win business from cities and counties. Bank of America agreed in December to pay $137 million. UBS agreed in May to pay $160 million.
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Business Writer David Pitt contributed to this story.
Article source: http://feeds.nytimes.com/click.phdo?i=d4780bc47e66836151dd27dddf0bb09e
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