Wells Fargo 2011 Annual Report Download - page 185

Foreclosure Assistance Payment $1 billion paid
directly to the federal government and the participating
states for their use to address the impact of foreclosure
challenges as they see fit and which may include direct
payments to consumers. As of December 31, 2011, we had
fully accrued for the Foreclosure Assistance Payment.
Government agencies continue investigations or examinations of
other mortgage related practices of Wells Fargo. The
investigations relate to two main topics, (1) whether Wells Fargo
may have violated fair lending or other laws and regulations
relating to mortgage origination practices; and (2) whether Wells
Fargo properly disclosed in offering documents for its residential
mortgage-backed securities the facts and risks associated with
those securities. Wells Fargo has received a Wells notice from
SEC staff relating to Wells Fargo’s disclosures in mortgage-
backed securities offering documents. Wells Fargo continues to
provide information requested by the various agencies in
connection with certain investigations.
MUNICIPAL DERIVATIVES BID PRACTICES INVESTIGATION
The DOJ and the SEC, beginning in November 2006, requested
information from a number of financial institutions, including
Wachovia Bank, N.A.’s municipal derivatives group, with regard
to competitive bid practices in the municipal derivative markets.
Other state and federal agencies subsequently also began
investigations of the same practices. On December 8, 2011, a
global resolution of the Wachovia Bank investigations was
announced by DOJ, the Internal Revenue Service, the SEC, the
OCC and a group of State Attorneys General. The investigations
were settled with Wachovia Bank agreeing to pay a total of
approximately $148 million in penalties and remediation to the
various agencies.
Wachovia Bank, along with a number of other banks and
financial services companies, was named as a defendant in a
number of substantially identical purported class actions and
individual 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 government investigations.
These cases were either consolidated under the caption In re
Municipal Derivatives Antitrust Litigation or administered
jointly with that action in the U.S. District Court for the
Southern District of New York. The plaintiffs and Wells Fargo
agreed to settle the In re Municipal Derivatives Antitrust
Litigation on October 21, 2011. The settlement is subject to court
approval and, if finally approved, will result in Wells Fargo
paying the amount of $37 million. The settlement was
preliminarily approved on December 27, 2011.
ORDER OF POSTING LITIGATION A series of putative class
actions have been filed against Wachovia Bank, N.A. and Wells
Fargo Bank, N.A., as well as many other banks, challenging the
high to low order in which the Banks post debit card transactions
to consumer deposit accounts. There are currently several such
cases pending against Wells Fargo Bank (including the Wachovia
Bank cases to which Wells Fargo succeeded), most of which have
been consolidated in multi-district litigation proceedings in the
U.S. District Court for the Southern District of Florida. The bank
defendants moved to compel these cases to arbitration under
recent Supreme Court authority. On November 22, 2011, the
Judge denied the motion. The Banks have appealed the decision
to the U.S. Court of Appeals for the Eleventh Circuit.
On August 10, 2010, the U.S. District Court for the Northern
District of California issued an order in Gutierrez v. Wells Fargo
Bank, N.A., a case that was not consolidated in the multi-district
proceedings, enjoining the Bank’s use of the high to low posting
method for debit card transactions with respect to the plaintiff
class of California depositors, directing that the Bank establish a
different posting methodology and ordering remediation of
approximately $203 million. On October 26, 2010, a final
judgment was entered in Gutierrez. On October 28, 2010, Wells
Fargo appealed to the U.S. Court of Appeals for the Ninth
Circuit.
WACHOVIA EQUITY SECURITIES AND BONDS/NOTES LITIGATION A
securities class action, now captioned In re Wachovia Equity
Securities Litigation, has been pending under various names
since July 7, 2008, in the U.S. District Court for the Southern
District of New York alleging violations of Sections 10(b) and
20(a) of the Securities Exchange Act of 1934. Among other
allegations, plaintiffs allege Wachovia’s common stock price was
artificially inflated as a result of allegedly misleading disclosures
relating to the Golden West Financial Corp. mortgage portfolio,
Wachovia’s exposure to other mortgage related products such as
CDOs, control issues and auction rate securities. 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. On March 31, 2011, the U.S. District Court for the Southern
District of New York entered a Decision and Order granting
Wachovia’s motions to dismiss the In re Wachovia Equity
Securities Litigation and the Stichting Pensioenfonds ABP, FC
Holdings AB, Deka Investment GmbH and Forsta AP-Fonden
cases. Plaintiffs and Wells Fargo have agreed to settle the Equity
Securities Litigation for $75 million and on January 27, 2012,
the Court entered an order preliminarily approving the
settlement. A fairness hearing on final approval of the settlement
is scheduled for June 1, 2012.
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 matter
was captioned In Re Wachovia Preferred Securities and
Bond/Notes Litigation. On March 31, 2011, by the same Decision
and Order referenced above, the court also granted in part and
denied in part Wachovia’s motion to dismiss the In re Wachovia
Preferred Securities and Bond/Notes Litigation, allowing that
case to go forward after limiting the number of offerings at issue.
183