A global settlement has been reached between Wells Fargo & Co. and institutional investors that purchased Wachovia securities. It is worth a of total $627 million.
The bulk of the settlement comprises $590 million from Wells Fargo, which bought Wachovia in late 2008, and an additional $37 million in from Wachovia’s then auditor, KPMG.
The case was brought in U.S. District Court for the Southern District of New York.
The plaintiff institutional investors included Orange County Employees’ Retirement System, the Louisiana Sheriffs’ Pension and Relief Fund, and the Southeastern Pennsylvania Transportation Authority, which were court-appointed representatives of a class of investors who bought Wachovia bonds and preferred securities between July 31, 2006 and May 29, 2008.
The claims in this case were largely based on allegations that the Wachovia offering materials at issue misrepresented and/or omitted to disclose material facts regarding the nature and quality of Wachovia’s multi-billion dollar option-ARM “Pick-A-Pay” mortgage loan portfolio.
It also said that Wachovia’s publicly disclosed loan loss reserves were materially inadequate at all relevant times, which violated the Generally Accepted Accounting Principles.
The complaint also alleged that the undisclosed problems in the “Pick-A-Pay” mortgage loan portfolio brought Wachovia to the brink of insolvency by September 2008.
Plaintiffs were represented by the law firms of Bernstein Litowitz Berger & Grossmann, Kessler Topaz Meltzer & Check, and Robbins Geller Rudman & Dowd LLP as co-lead counsel for the class.
