California Sues Wells Fargo Over Auction Rate Securities
Posted by Larry Doyle on April 24, 2009 5:37 AM |
Something is seriously wrong in our country when the general media does not hold a financial institution to bear when engaged in a fraudulent activity.
Once again today, another suit was brought on behalf of investors in Auction Rate Securities. Bloomberg reports, California Sues Wells Over Auction-Rate Securities.
Wells Fargo just announced tremendous earnings. While a handful of banks have either settled ARS suits or paid out their investors, Wells is still holding out on investors who purchased ARS from Wells’ financial advisors.
A website dedicated to covering the ARS travesty (www.auctionratepreferreds.org) indicates that the Wells Fargo Trust division servicing institutional customers stopped marketing ARS two years ago while Wells Fargo financial advisors continued to sell ARS to retail clients.
California Attorney General Jerry Brown sued units of Wells Fargo & Co. claiming they deceptively advertised $1.5 billion of auction-rate securities sold to investors in the state as being as safe as cash.
Wells Fargo Investments LLC, Wells Fargo Brokerage Services LLC and Wells Fargo Institutional Services LLC promised investors that the securities were cash-like investments similar to money-market accounts when they weren’t, Brown said in a statement today. About 2,400 Californians are unable to sell the securities, marketed as short-term investments, and access money needed to pay their bills, Brown said.
While other banks, including Citigroup, have agreed to repurchase auction rate securities they sold, the Wells Fargo units have refused to follow suit, he said. The lawsuit seeks to recover $1.5 billion and civil penalties that could amount to hundreds of millions of dollars.
“Wells Fargo’s affiliates promised investors auction-rate securities were as safe and liquid as cash, when in fact they were not, and now investors are unable to get their money when they need it,” Brown said in the statement. The lawsuit was filed in San Francisco Superior Court.
While Bloomberg has offered coverage of this ARS fraud, I have seen no other media outlet provide any coverage.
Why is it that the media will not expose the fact that the Wall Street industry watchdog FINRA had a $647 million ARS stake in 2007? Is it too much to ask a media outlet to pursue and expose the hypocrisy and incompetence of that entity and its internal investment activities?