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World Vs. Wachovia Vs. Wells

World Vs. Wachovia Vs. WellsSeveral pending lawsuits disclosed against Wells

March 13, 2009

By MortgageDaily.com staff

Acquisitions that helped create the biggest U.S. residential lender have also sparked a flurry of lawsuits.In a filing with the Securities and Exchange Commission last month, Wells Fargo & Co. said its various units are involved in judicial, regulatory and arbitration proceedings.

“Although there can be no assurance as to the ultimate outcome, Wells Fargo and/or our subsidiaries have generally denied, or believe we have a meritorious defense and will deny, liability in all significant litigation pending against us,” the filing said. “We intend to defend vigorously each case, other than matters we describe as having settled.”

But the financial institution has established some reserves for legal claims where payments are likely.

A securities class-action filed on July 7, 2008, against Wachovia Corp. claims the formerly Charlotte, N.C.-based company artificially inflated the price of its common shares by issuing misleading disclosures about Golden West Financial Corp.’s mortgage portfolio. A response was required by Feb. 27 in that case, which was filed in U.S. District Court for the Southern District of New York.

Wachovia, which was acquired by Wells Fargo on Dec. 31, purchased Golden West — the parent of World Savings — in October 2006. By including fourth-quarter 2008 Wachovia mortgage originations in its financial results, Wells ended last year with $230 billion in residential production — more than any other U.S. lender.

In another class action filed on Jan. 31 in the New York Supreme Court for the County of Nassau, Wachovia Corp. is accused of violating Sections 11, 12 and 15 of the Securities Act of 1933 in the issuance of trust preferred securities. At issue are allegedly misleading disclosures tied to Golden West’s mortgage portfolio. The case, Miller et al., v. Wachovia Corporation, et al., was removed to U.S. District Court for the Eastern District of New York, then dismissed by the plaintiff and re-filed in the Superior Court of the State of California, Alameda County, where it sits now.

A similar lawsuit, Swiskay v. Wachovia Corporation, et al., was filed on Dec. 19, 2008, also in Superior Court of the State of California, Alameda County. The case is almost identical to the Miller lawsuit except for allegations related to additional Wachovia preferred offerings.

A fourth lawsuit was filed, again in the same court, on Jan. 21 on behalf of Orange County Employees’ Retirement System and others. This case only varies from the other two in that it includes additional individuals and non-affiliated entities as defendants and adds claims relating to additional issuances of preferred stock and debt securities.

“Wells Fargo will file appropriate venue and other motions in response to these actions,” the filing said.

A $60 billion lawsuit was reportedly filed by Citigroup Inc. on Oct. 4, 2008, in the Supreme Court of the State of New York for the County of Manhattan against Wachovia Corp., Wells Fargo & Co. as well as directors of both companies. Citi accussed Wachovia of breaching an exclusivity agreement by abandoning a deal the two companies had already agreed to in favor of an offer by Wells.

The case was removed on Oct. 9, 2008, to U.S. District Court for the Southern District of New York, which was followed by an Oct. 10, 2008, motion by Citi to file remand the case to New York state court. A new complaint filed by Citi increased the lawsuit to $80 billion. The defendants filed a joint response to the lawsuit on Oct. 24.

Wachovia shot back with its own lawsuit against Citi seeking declaratory relief and stating that the merger agreement with Wells is valid. Citi then agreed not to block the acquisition by Wells but still intended to get its $80 billion in court.

The litany of litigation between the three companies continued, with Wells filing a lawsuit against Citi on Oct. 14 seeking declaratory and injunctive relief confirming the merger is valid. Citi moved to dismiss the complaint.

All three cases have been assigned to the same judge.

Wells Fargo & Co., Wells Fargo Bank, N.A., Wachovia Bank, N.A. and Wachovia Corp. are among more than 55 defendants named in two actions filed by Data Treasury Corp. The case, filed in U.S. District Cour for the Eastern Districe of Texas, assert patent infringement.The two cases are in the discovery stage.

“Based on information currently available, advice of counsel, available insurance coverage and established reserves,” the filing concluded, “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.”

Wells added that it will cooperate with government agencies currently investigating it over allegations similar to those in the investor lawsuits.

Lipetz v. Wachovia Corporation, et al.
July 7, 2008 (U.S. District Court for the Southern District of New York)

Miller, et al. v. Wachovia Corporation, et al.
Jan. 31, 2009 (Superior Court of the State of California, Alameda County)

Swiskay v. Wachovia Corporation, et al.
Dec. 19, 2008 (Superior Court of the State of California, Alameda County)

Orange County Employees’ Retirement System, et al. v. Wachovia Corporation, et al.
Jan. 21, 
2009 (Superior Court of the State of California, Alameda County)

Citigroup, Inc. v. Wachovia Corp., et al.
Oct. 4, 2008 (Supreme Court of the State of New York for the County of Manhattan)

Wachovia Corp. v. Citigroup, Inc.
Oct. 4, 2008 (U.S. District Court for the Southern District of New York)

Wells Fargo v. Citigroup, Inc.
Oct. 14, 2008, (U.S. District Court for the Southern District of New York)


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