Business Journal: Wells Fargo Settles with State

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(Sacramento, CA)
Wednesday, November 18, 2009
The state of California reached a settlement with investment subsidiaries of Wells Fargo & Co., with the banking giant agreeing to buy back $1.4 billion of illiquid securities from investors.
Charities, small-business owners and individual investors bought the securities based on incorrect advice from the bank that they were cash equivalent securities, meaning that they could be easily sold, according to state Attorney General Jerry Brown. The problem with the securities was that when the market froze, investors could not quickly sell the investments.
Under the settlement, Wells Fargo will buy back the auction-rate securities from investors, including about $700 million from Californians. Some of the securities were sold by Wells Fargo and others by Wachovia, which Wells bought in December.
Wells Fargo is the third-largest bank in the four-county region, based on deposits, according to the Federal Deposit Insurance Corp.