Wachovia to pay 26 states $58.75 million

CHARLOTTE, N.C. (Legal Newsline) - Twenty-six state attorneys general have reached a $58.75 million agreement with Wachovia Bank N.A., they announced Thursday.

The settlement will resolve the states' antitrust investigation into the bank's marketing of municipal derivatives, the attorneys general said.

According to the agreement, $54.5 million in restitution will be available to eligible governmental and nonprofit entities that entered into municipal derivative agreements with Wachovia between 1998 and 2004.

Those qualifying entities will be notified if they are eligible for restitution. However, they must submit a claim and follow the process provided in the agreement, the attorneys general said.

Also under the agreement, Wachovia will pay $3 million directly to those working on the settlement as an additional payment for investigative costs and fees, and a $1.25 million civil penalty.

The agreement also requires the bank's "continued cooperation" with the states' ongoing investigation.

The states that negotiated the agreement include: Alabama, California, Colorado, Connecticut, District of Columbia, Florida, Idaho, Illinois, Iowa, Kansas, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas and Wisconsin.

Wells Fargo & Company, which acquired Wachovia in 2008, released its own statement Thursday regarding the settlement.

It said the agreement resolved previously disclosed investigations into the conduct of "certain former employees" in Wachovia's former municipal reinvestment and derivatives group prior to their merger.

"Wells Fargo is pleased to have fully resolved this investigation of Wachovia Bank," it said. "The underlying transactions were entered into in a business that existed at Wachovia Bank, which Wells Fargo acquired in 2008, and involved employees who are no longer with the firm."

The bank reached settlements not only with the attorneys general, but also the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the U.S. Internal Revenue Service and the U.S. Department of Justice, Wells Fargo said.

The total amount of the settlement is $148,243,013.

Wachovia will pay $8.9 million to the IRS, $46.075 million to the SEC and $34.518 million to the OCC, in addition to the $58.75 million to the attorneys general.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.