CHARLOTTE, N.C. — When Wells Fargo & Co. stepped in and snatched up Charlotte-based Wachovia Corp., even as Citigroup Inc. had already reached a deal to acquire the failing bank, Citi sued seeking $60 billion in damages. The two companies have now agreed to a settlement for far less than originally sought.
San Francisco-based Wells Fargo will pay $100 million to New York-based Citi to resolve all claims in the dispute, the banks said in a joint statement. The payment caps a feud that emerged at the peak of the 2008 financial crisis and shook Charlotte and one of its financial giants.
“We are glad to put this matter behind us, and we look forward to our two institutions working together constructively in the future,” the companies said in a joint statement.
The settlement is far less than the more than $60 billion in damages Citi initially sought when it accused Wells Fargo of interfering in its deal to purchase Wachovia. Wells Fargo ultimately bought the N.C. institution for $15 billion at the end of 2008.
“That’s not pocket change, but for these kind of entities, it’s not a whole lot of money,” said Carl Tobias, a law professor at the University of Richmond.
The agreement makes sense, Tobias said, because it allows both banks to stop shelling out expensive legal fees after more than two years of litigation.
In September 2008, as Wachovia nearly collapsed under the weight of its soured mortgage portfolio, Citi agreed to buy most of Wachovia’s banking operations for $1 per share. As part of the deal, the government agreed to cover losses on some of Wachovia’s most troubled assets.
But days later, Wells Fargo swooped in with a rival offer that offered to pay $7 per share and required no loss-sharing agreement with the government. Both banks fired off lawsuits, and the Federal Reserve attempted to broker a truce.
“We kept the system going. We kept Wachovia going. We need to be paid for that as a company,” an angry Vikram Pandit, Citi’s chief executive, told employees at a town hall meeting during the spat.
Citi and Wells Fargo came close to an agreement to carve up Wachovia’s operations, according to suggestions in e-mails that McClatchy Newspapers has obtained through a Freedom of Information Act request.
But on Oct. 9, 2008, Citi instead allowed Wells Fargo to move forward with its deal, while continuing to pursue legal damages.
Wells Fargo is now a coast-to-coast bank with $750 billion in deposits, behind only Charlotte-based Bank of America Corp. Citi remains No. 4 with less than half that amount.
Many observers believe losing out on Wachovia further shattered investors’ confidence in ailing Citi. Less than two months later, the New York bank needed its own injection of government aid.
