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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.

Bloomberg highlights:

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?

LD

  • This is a great articles . Thanks for sharing.

  • Dinker

    It speaks to the complete abdication of our national media to cover the news in an unbiased manner when their own economic interests involved. We all know that WF spends heavily on tv commercials, so it’s not accidental that a story involving a $360 BILLION fraud has received no mainstream national news coverage.
    As to the CA case, what is the status of the suit? The State of WA filed a similar suit against WF on behalf of all US investors in Nov of 2008 and has achieved no results. Only the AGs of NY State and MO (to my knowledge) have achieved any settlements to date.

    • Larry Doyle

      Dinker….

      I agree in regard to the lack of real coverage of this story by the media. Rest assured I have been writing on this topic extensively. Over and above the case with Wells Fargo and assorted other banks, brokers, and money managers which fraudulently sold and marketed ARS, the Wall Street self-regulatory organization FINRA owned and then sold upwards of $650 million ARS in 2007.

      If you have interest in seeing all of my writing on this topic, type Auction Rate Securities in the search window on any page here at Sense on Cents. I hope you have some extra time, as I have written a lot. …and rest assured, will continue to write even more.

      Glad you found Sense on Cents.






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