Monday, November 30, 2015

Feds slap Wachovia for ripping off taxpayers (Update)

Bank to pay $185 million for fixing bond prices on 58 deals in 25 states; victims include Philadelphia, North Wales, PA Turnpike, state-funded colleges, counties, and at least one PA hospital

Feds slap Wachovia for ripping off taxpayers (Update)


(Updates losses to PA issuers in third paragraph) Wachovia Bank (now part of Wells Fargo), the dominant bank in Philadelphia and other big metro areas, "rigged at least 58 transactions" to sweeten its profits from $9 billion it helped cities, towns and municipal authorities in 25 states and Puerto Rico borrow through bond issues in 1997-2005, Elaine Greenberg, head of the Securities and Exchange Commission's Philadelphia office, said in this statement today.

Under a series of settlements with Justice, SEC, IRS, Treasury's Office of the Comptroller of the Currency (OCC), and state attorney generals and New York State, Wells Fargo will repay around $185 million in ill-gotten gains and penalties.

The OCC today made public $14 million, or less than 10%, of the bank's total repayments, including $5 million to a Minneapolis hospital,
$1.1 million to the Pennsylvania Higher Education Facilities Authority, $584,000 to North Wales borough in Montgomery County, $138,000 to Philadelphia for a "collateralized certificant of deposit" transaction, a total of at least $1.8 million to towns in northern and western Pennsylvania, and $42,000 to Crozer-Chester Medical Center, among others. (Updated with additional information from OCC)

Later, the Pennsylvania Attorney General's Office said the state portion of the investigation has seperately "identified approximately 150 Pennsylvania municipalities and agencies believed to have been victimized as part of the scheme involving Wachovia, including the Pennsylvania Turnpike Commission; numerous county governments; the Philadelphia Parking Authority; several county water, sewer and development authorities; and more than a dozen public school districts.

"Anticipated restitution amounts range from several hundred dollars to nearly $400,000, depending on the size of the investment made by the victims."

Otherwise, the government hasn't yet said which towns or which bond issues were rotten, though an unnamed "New Jersey authority" was among the victims, according to the SEC complaint  We'll link more lists when we get them (probably not today). The settlement follows similar deals with JPMorgan, UBS and Bank of America for ripping off local taxpayers.

In a statement, the bank said it was glad the investigation is settled, and summarized payments: "
$8.9 million to the IRS; $46.075 million to the SEC, $34.518 million to the OCC; and an additional $58.75 million to the state Attorneys General. As previously disclosed, Wells Fargo has also resolved, subject to Court approval, related civil litigation pending in the U.S. District Court for the Southern District of New York for $37 million. 

"The payments will not have an adverse effect on Wells Fargo’s financial results and the settlement will not adversely affect the conduct of any current business of Wells Fargo," the bank said in a statement. "Wells Fargo cooperated."

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About this blog

PhillyDeals posts interviews, drafts and updates that Joseph N. DiStefano writes alongside his Sunday and Monday columns and ongoing articles about Philadelphia-area business.

DiStefano studied economics, history and a little engineering at Penn. He taught writing and research at St. Joe’s. He has written for the Inquirer since 1989, except when he left a few times to work at Bloomberg and elsewhere. He wrote the book Comcasted, and raised six kids with his wife, who is a saint.

Reach Joseph N. at, 215.854.5194, @PhillyJoeD. Read his blog posts at and his Inquirer columns at Bloomberg posts his items at NH BLG_PHILLYDEAL.

Reach Joseph N. at or 215 854 5194.

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