Wells Fargo & Company Case 04/14/2008
JULY 2011 - According to the Notice:
Description of the Litigation and Settlement Class: This Notice relates to the pendency and proposed settlement of a class action lawsuit against Defendants Wells Fargo Bank, N.A. and Wells Fargo Asset Securities Corporation (together, “Wells Fargo” or the “Company”); David Moskowitz, Franklin Codel, Douglas K. Johnson, and Thomas Neary (collectively, the “Individual Defendants”); and Goldman, Sachs & Co.; Bear Stearns & Co., Inc. (including J.P. Morgan Securities LLC as successor-in-interest); Deutsche Bank Securities, Inc.; UBS Securities, LLC; Credit Suisse Securities (USA) LLC; RBS Securities Inc., f.k.a. Greenwich Capital Markets, Inc.; Banc of America Securities, LLC; Citigroup Global Markets, Inc.; and Merrill Lynch, Pierce, Fenner & Smith Incorporated (collectively, “Underwriter Defendants”). Wells Fargo, the Individual Defendants, and the Underwriter Defendants are collectively referred to as the “Defendants.” “Plaintiffs” means the Class Representatives Alameda County Employees’ Retirement Association, Government of Guam Retirement Fund, New Orleans Employees’ Retirement System, Louisiana Sheriffs’ Pension and Relief Fund, General Retirement System of the City of Detroit, Vermont Pension Investment Committee, Public Employees’ Retirement System of Mississippi, Policemen’s Annuity & Benefit Fund of the City of Chicago, Southeastern Pennsylvania Transportation Authority, and Plumbers & Steamfitters Local 60 Pension Plan, and Plaintiff First Star Bank. The “Settling Parties” mean (i) Wells Fargo, (ii) Individual Defendants, (iii) Underwriter Defendants,
(iv) the Wells Fargo Mortgage Backed Securities 2006-AR15 Trust, (v) the Lead Plaintiffs on behalf of themselves and the Class Members, and (vi) the other Plaintiffs. The proposed Settlement, if approved by the Court, will settle certain claims of all persons and entities who purchased or otherwise acquired mortgage pass-through certificates pursuant or traceable to Wells Fargo Asset Securities Corporation’s July 29, 2005 Registration Statement, October 20, 2005
Registration Statement, or September 27, 2006 Registration Statement, and the accompanying prospectuses and prospectus supplements in the 28 Offerings and were damaged thereby (the “Settlement Class”).
Statement of the Settlement Class’ Recovery: Subject to Court approval and, as described more fully below, Lead Plaintiffs, on behalf of themselves and the Settlement Class, and the other Plaintiffs, have agreed to settle all Settled Claims (as defined in ¶54 below) against Defendants and other Released Parties in exchange for a settlement payment of $125 million to be deposited into an interest-bearing escrow account (the “Settlement Fund”). The Net Settlement Fund (the Settlement Fund less taxes, notice and administration costs, and attorneys’ fees and certain Litigation Expenses awarded to Lead Counsel) will be distributed in accordance with a plan of allocation (the “Plan of Allocation”) that will be approved by the Court and will determine how the Net Settlement Fund shall be allocated to the members of the Settlement Class. The proposed Plan of Allocation is included in this Notice, and may be modified by the Court without further notice.
APRIL 2008 - According to a press release dated April 14, 2008, the Complaint alleges that Wells Fargo violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by deceiving investors about the investment characteristics of auction rate securities and the auction market in which these securities traded. Auction rate securities are either municipal or corporate debt securities or preferred stocks which pay interest at rates set at periodic “auctions.” Auction rate securities generally have long-term maturities or no maturity dates.
The Complaint alleges that, pursuant to uniform sales materials and top-down management directives, Wells Fargo offered and sold auction rate securities to the public as highly liquid cash-management vehicles and as suitable alternatives to money market mutual funds. According to the Complaint, holders of auction rate securities sold by Wells Fargo and others have been unable to liquidate their positions in these securities following the decision on February 13, 2008 of all major broker-dealers including Wells Fargo to “withdraw their support” for the periodic auctions at which the interest rates paid on auction rates securities are set.
The Complaint alleges that Wells Fargo failed to disclose the following material facts about the auction rate securities it sold to the class: (1) the auction rate securities were not cash alternatives, like money market funds, but were instead, complex, long-term financial instruments with 30 year maturity dates, or longer; (2) the auction rate securities were only liquid at the time of sale because broker-dealers were artificially supporting and manipulating the auction rate market to maintain the appearance of liquidity and stability; and (3) broker-dealers routinely intervened in auctions for their own benefit, to set rates and prevent all-hold auctions and failed auctions.