Wells Fargo 2008 Annual Report Download - page 133

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as targets of the DOJ’s investigation. Wachovia Bank has
been cooperating and continues to fully cooperate with the
government investigations.
Wachovia Bank, along with a number of other banks
and financial services companies, has also been named as a
defendant in a number of substantially identical purported
class actions, filed in various state and federal courts by
various municipalities alleging they have been damaged
by the activity which is the subject of the governmental
investigations. A number of the federal matters have been
consolidated for pre trial proceedings.
PAYMENT PROCESSING CENTER On February 17, 2006, the U.S.
Attorney’s Office for the Eastern District of Pennsylvania
filed a civil fraud complaint against a former Wachovia Bank,
N.A. customer, Payment Processing Center (PPC). PPC was
a third party payment processor for telemarketing and
catalogue companies. On April 12, 2007, a civil class action,
Faloney et al. v. Wachovia Bank, N.A., was filed against
Wachovia Bank in the U.S. District Court for the Eastern
District of Pennsylvania by a putative class of consumers
who made purchases through telemarketer customers of PPC.
The suit alleges that between April 1, 2005 and February 21,
2006, Wachovia Bank conspired with PPC to facilitate PPC’s
purported violation of RICO. On February 15, 2008, a second
putative class action, Harrison v. Wachovia Bank, N.A., was
filed in the U.S. District Court for the Eastern District of
Pennsylvania by a putative class of consumers who made
purchases through telemarketing customers of three other
third party payment processors which banked with Wachovia
Bank. This suit alleges that Wachovia Bank conspired with
these payment processors to facilitate purported violations
of RICO. On April 24, 2008, Wachovia and the Office of
the Comptroller of the Currency (OCC) entered into
an Agreement to resolve the OCC’s investigation into
Wachovia’s relationship with PPC and three other companies.
The Agreement provides, among other things, that
(i) Wachovia will provide restitution to consumers, (ii) will
create a segregated account in the amount of $125 million
to cover the estimated maximum cost of the restitution,
(iii) will fund organizations that provide education for
consumers over a two year period in the amount of $8.9 million,
(iv) will make various changes to its policies and procedures
related to customers that use remotely created checks and
(v) will appoint a special Compliance Committee to oversee
compliance with the Agreement. Wachovia Bank and the
OCC also entered into a Consent Order for Payment of a
Civil Money Penalty whereby Wachovia, without admitting
or denying the allegations contained therein, agreed to
payment of a $10 million civil money penalty. The OCC
Agreement was amended on December 8, 2008, to provide
for direct restitution payments and those payments were
mailed to consumers on December 11, 2008. Wachovia Bank
is cooperating with government officials to administer the
OCC settlement and in their further inquiries.
On August 14, 2008, Wachovia Bank reached agreements
to settle the Faloney and Harrison class action lawsuits. The
settlements received approval from the U.S. District Court for
the Eastern District of Pennsylvania on January 23, 2009.
OTHER REGULATORY MATTERS AND GOVERNMENT
INVESTIGATIONS In the course of its banking and financial
services businesses, Wells Fargo and its affiliates are subject
to information requests and investigations by governmental
and self-regulatory authorities. These authorities have
instituted various ongoing investigations of various practices
in the banking, securities and mutual fund industries, including
those relating to anti-money laundering, sales practices,
record retention and other laws and regulations involving
our customers and their accounts.
In general, the investigations cover advisory companies
to mutual funds, broker-dealers, hedge funds and others and
may involve the activities of customers or third parties with
respect to accounts maintained by Wells Fargo affiliates or
transactions in which Wells Fargo affiliates may be involved.
Wells Fargo affiliates have received subpoenas and other
requests for documents and testimony relating to the
investigations, is endeavoring to comply with those requests,
is cooperating with the investigations, and where appropriate,
is engaging in discussions to resolve the investigations or
take other remedial actions. These investigations include an
investigation being conducted by the U.S. Attorney’s Office
for the Southern District of Florida into, among other matters,
Wachovia Bank, N.A.’s correspondent banking relationship
with certain non-domestic exchange houses and Bank
Secrecy Act and anti-money laundering compliance.
Wachovia Bank is cooperating fully with the U.S. Attorney’s
Office’s investigation.
OUTLOOK Based on information currently available, advice
of counsel, available insurance coverage and established
reserves, Wells Fargo believes that the eventual outcome
of the actions against Wells Fargo and/or its subsidiaries,
including the matters described above, will not, individually
or in the aggregate, have a material adverse effect on
Wells Fargo’s consolidated financial position or results
of operations. However, in the event of unexpected future
developments, it is possible that the ultimate resolution of
those matters, if unfavorable, may be material to Wells Fargo’s
results of operations for any particular period.