Wells Fargo to pay $148 million to settle Wachovia bid-rigging charges

By Angela McDaniels

Tacoma, Wash., Dec. 8 - Wells Fargo Bank, formerly Wachovia Bank NA, has become the latest bank charged by the Securities and Exchange Commission with municipal bid rigging.

Wachovia Bank became Wells Fargo Bank following a merger in March 2010.

Without admitting or denying the allegations, the bank agreed to settle the charges by paying $46 million to the SEC that will be returned to affected municipalities. It will pay an additional $102 million under agreements with the Justice Department, the Office of the Comptroller of the Currency, the Internal Revenue Service and 26 state attorneys general.

The SEC noted that after issuing municipal securities, municipalities generally temporarily invest the proceeds in municipal reinvestment products until the money is used for the intended purposes. The proceeds of tax-exempt municipal securities must generally be invested at fair market value, and the most common way of establishing fair market value is through a competitive bidding process.

The SEC alleges that from at least 1997 to 2005, Wachovia fraudulently rigged at least 58 municipal bond reinvestment transactions in 25 states and Puerto Rico.

According to the SEC, Wachovia won some bids because it obtained information from the bidding agents about competing bids, a practice known as "last looks." In other instances, according to the SEC, it won bids because the bidding agent deliberately obtained non-winning bids from other providers, and it facilitated bids rigged for others to win by deliberately submitting non-winning bids.

The SEC said four financial institutions have so far paid a total of $673 million in the ongoing investigations into corruption in the municipal reinvestment industry. J.P. Morgan Securities LLC reached a $228 million settlement with the SEC and other federal and state authorities on July 7, UBS Financial Services Inc. reached a $160 million settlement on May 4, 2011, and Banc of America Securities LLC reached a $137 million settlement on Dec. 7, 2010.

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