Wells Fargo 2009 Annual Report Download - page 146

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GOLDEN WEST AND RELATED LITIGATION A purported securi-
ties class action, Lipetz v. Wachovia Corporation, et al.,
was filed on July 7, 2008, in the U.S. District Court for the
Southern District of New York alleging violations of Sections
10 and 20 of the Securities Exchange Act of 1934. An amend-
ed complaint was filed on December 15, 2008. Among other
allegations, plaintiffs allege Wachovia Corporation’s common
stock price was artificially inflated as a result of allegedly
misleading disclosures relating to the Golden West
Financial Corp. (Golden West) mortgage portfolio, Wachovia
Corporation’s exposure to other mortgage related products
such as CDOs, control issues and ARS. On March 19, 2009,
the defendants filed a motion to dismiss the amended class
action complaint in the Lipetz case, which has now been
re-captioned as In re Wachovia Equity Securities Litigation.
There are four additional cases (not class actions) containing
allegations similar to the allegations in the In re Wachovia
Equity Securities Litigation captioned Stichting Pensioenfonds
ABP v. Wachovia Corp. et al., FC Holdings AB, et al. v.
Wachovia Corp., et al., Deka Investment GmbH v. Wachovia
Corp. et al. and Forsta AP-Fonden v. Wachovia Corp., et al.,
respectively, which were filed in the U.S. District Court for
the Southern District of New York, and there are a number
of other similar actions filed in state courts in North Carolina
and South Carolina by individual shareholders.
After a number of procedural motions, three purported
class action cases alleging violations of Sections 11, 12, and 15
of the Securities Act of 1933 as a result of allegedly misleading
disclosures relating to the Golden West mortgage portfolio
in connection with Wachovia’s issuance of various preferred
securities and bonds were transferred to the U.S. District Court
for the Southern District of New York. A consolidated class
action complaint was filed on September 4, 2009, and the mat-
ter is now captioned In Re Wachovia Preferred Securities and
Bond/Notes Litigation. On September 29, 2009, a non-class
action case containing allegations similar to the allegations
in the In re Wachovia Preferred Securities and Bond/Notes
litigation, and captioned City of Livonia Employees’ Retirement
System v. Wachovia Corp et al., was filed in the Southern
District of New York.
Motions to dismiss all of these cases are pending.
Several government agencies are investigating matters
similar to the issues raised in this litigation. Wells Fargo and
its affiliates are cooperating fully.
ILLINOIS ATTORNEY GENERAL LITIGATION On July 31, 2009,
the Attorney General for the State of Illinois filed a civil
lawsuit against Wells Fargo & Company, Wells Fargo Bank,
N.A. and Wells Fargo Financial Illinois, Inc. in the Circuit
Court for Cook County, Illinois. The Illinois Attorney General
alleges that the Wells Fargo defendants engaged in illegal
discrimination by “reverse redlining” and by steering
African-American and Latino customers into high cost,
subprime mortgage loans while other borrowers with similar
incomes received lower cost mortgages. Illinois also alleges
that Wells Fargo Financial Illinois, Inc. misled Illinois
customers about the terms of mortgage loans. Illinois’
complaint against all Wells Fargo defendants is based on
alleged violation of the Illinois Human Rights Act and the
Illinois Fairness in Lending Act. The complaint also alleges
that Wells Fargo Financial Illinois, Inc. violated the Illinois
Consumer Fraud and Deceptive Business Practices Act and
the Illinois Uniform Deceptive Trade Practices Act. Illinois’
complaint seeks an injunction against the defendants’ alleged
violation of these Illinois statutes, restitution to consumers
and civil money penalties. On October 9, 2009, the Company
filed a motion to dismiss Illinois’ complaint.
INTERCHANGE LITIGATION Wells Fargo Bank, N.A., Wells Fargo
& Company, Wachovia Bank, N.A. and Wachovia Corporation
are named as defendants, separately or in combination, in
putative class actions filed on behalf of a plaintiff class of
merchants and in individual actions brought by individual
merchants with regard to the interchange fees associated
with Visa and MasterCard payment card transactions. These
actions have been consolidated in the United States District
Court for the Eastern District of New York. Visa, MasterCard
and several banks and bank holding companies are named
as defendants in various of these actions. The amended and
consolidated complaint asserts claims against defendants
based on alleged violations of federal and state antitrust
laws and seeks damages, as well as injunctive relief. Plaintiff
merchants allege that Visa, MasterCard and their member
banks unlawfully colluded to set interchange rates. Plaintiffs
also allege that enforcement of certain Visa and MasterCard
rules and alleged tying and bundling of services offered to
merchants are anticompetitive. Wells Fargo and Wachovia,
along with other members of Visa, are parties to Loss and
Judgment Sharing Agreements (the Agreements), which
provide that they, along with other member banks of Visa,
will share, based on a formula, in any losses from certain
litigation specified in the Agreements, including the
Interchange Litigation.
LE-NATURE’S INC. Wachovia Bank, N.A. is the administrative
agent on a $285 million credit facility extended to Le-Nature’s,
Inc. (Le-Nature’s) in September 2006, of which approximately
$270 million was syndicated to other lenders by Wachovia
Capital Markets, LLC. Le-Nature’s was the subject of a
Chapter 7 bankruptcy petition which was converted to a
Chapter 11 bankruptcy petition in November 2006 in the U.S.
Bankruptcy Court for the Western District of Pennsylvania.
The filing was precipitated by an apparent fraud relating
to Le-Nature’s financial condition.
On March 14, 2007, the two Wachovia entities filed an
action against several hedge funds in the Superior Court for
the State of North Carolina, Mecklenburg County, alleging
that the hedge fund defendants had acquired a significant
quantity of the outstanding debt with full knowledge of
Le-Nature’s fraud and with the intention of pursuing alleged
fraud and other tort claims against the two Wachovia entities
purportedly related to their role in Le-Nature’s credit facility.
A preliminary injunction was entered by the Court that,
among other things, prohibited defendants from asserting
any such claims in any other forum. On March 13, 2008, the
North Carolina judge granted Defendants’ motion to stay
Note 14: Guarantees and Legal Actions (continued)