Wells Fargo & Co. has agreed to pay $148 million to settle charges against Wachovia Bank, which Wells Fargo acquired in 2008. The charges stem from investigations by the Securities and Exchange Commission, the Justice Department and 26 states’ attorneys general into how several banks rigged purportedly competitive auctions in order to receive excessive fees on investment contracts sold to municipalities. The investigations revealed that Wachovia and several of its former employees were involved with manipulating more than 58 transactions worth approximately $9 billion during an eight year period.
The allegations relate to investment contracts purchased by state and local municipalities which allow them to earn a return on the proceeds of municipal bonds sales until funds are needed for a public works project. Typically, municipalities receive multiple bids from various banks at auctions arranged by financial advisers, with the bank offering the highest return winning the contract. However, investigators say advisers manipulated the auctions to steer business to a favored bidder in return for kickbacks.
Wells Fargo neither admitted nor denied the allegations. Previously, JPMorgan Chase & Co., UBS AG and Bank of America Corp. settled similar charges.