Brown, securities regulators in spat over Wells Fargo settlement

By Chris Rizo | Nov 22, 2009

Jerry Brown (D)

Denise Voigt Crawford

SACRAMENTO, Calif. (Legal Newsline)-California Attorney General Jerry Brown and a group of securities regulators from other states are bickering over who forced Wells Fargo & Co. to buy back $1.4 billion in troubled securities.

On Wednesday, Brown and the North American Securities Administrators Association both took credit for the agreement, in which the bank agreed to buy back $1.4 billion in non-liquid auction-rate securities from thousands of retail customers, charities, and small businesses nationwide.

The Los Angeles Times reported that Brown's office said it reached its agreement with San Francisco-based Wells Fargo a day before the North American Securities Administrators Association did so.

"We forged the settlement ... and they just piggybacked on it," Brown spokeswoman Christine Gasparac was quoted by the newspaper as saying. "I don't want to get into a war with NASAA, but it's our settlement."

However, NASAA President and Texas Securities Commissioner Denise Voigt Crawford told the Times that Brown had noting to do with her group's agreement with Wells Fargo.

"He had nothing to do with our settlement," she said of Brown. "This is crazy. He's not the securities regulator in California and he wasn't involved in our negotiations. ...Now he's claiming credit for one of our settlements."

For auction-rate securities, the interest rate or dividend is reset periodically through an auction mechanism. The market for auction-rate securities soured last year.

Earlier this year, Brown filed a lawsuit against three Wells Fargo affiliates -- Wells Fargo Investments LLC, Wells Fargo Brokerage Services LLC and Wells Fargo Institutional Securities LLC.

The case filed in San Francisco County Superior Court alleged that the Wells Fargo affiliates "routinely misrepresented, marketed and sold auction-rate securities as safe, liquid and cash-like investments, omitting material facts.

Brown's lawsuit also alleged that despite warnings in 2005 from the Securities and Exchange Commission, four major accounting firms and the Financial Accounting Standards Board, Wells Fargo continued to sell auction-rate securities.

From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.

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