FOR IMMEDIATE RELEASE
December 9, 2011
For More Information, contact:
Joy Patterson (334) 242-7491
Alabama Attorney General
Suzanne Webb (334) 242-7351
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MULTISTATE WORKING GROUP AGREES TO $58.75 MILLION SETTLEMENT WITH
WACHOVIA OVER ANTICOMPETITIVE MUNICIPAL BOND DERIVATIVES SCHEME
(MONTGOMERY)–Alabama Attorney General Luther Strange announced a $58.75
million settlement with Wachovia Bank N.A. and Wells Fargo Bank, N.A., as its successor
(“Wachovia”) as part of an ongoing nationwide investigation of alleged anticompetitive and
fraudulent conduct in the municipal bond derivatives industry.
As part of the multistate settlement with 26 Attorneys General, Wachovia has agreed to
pay $54.5 million in restitution to affected state agencies, municipalities, school districts and not-
for-profit entities nationwide that entered into municipal derivative contracts with Wachovia
between 1998 and 2004. In addition, Wachovia agreed to pay a $1.25 million civil penalty and
$3 million for fees and costs of the investigation to the settling states.
The multistate task force settlement is part of a coordinated global $148 million
settlement that Wachovia entered into today. Wachovia also reached agreement with the U.S.
Department of Justice’s Antitrust Division, the U.S. Securities and Exchange Commission, the
Office of the Comptroller of the Currency, and the Internal Revenue Service. Wachovia is the
fourth financial institution to settle with a multistate task force in the ongoing municipal bond
derivatives investigation following Bank of America, UBS AG, and JP Morgan. To date, the
state working group has obtained settlements worth almost $310 million.
“I am pleased that this settlement will make compensation available to Alabama entities
that were harmed,” said Attorney General Strange. “I appreciate the leadership and diligent work
of those involved and commend our Antitrust Chief James Steinwinder for leading Alabama’s
four-year investigation and negotiation of the settlement on behalf of the State of Alabama.”
This settlement was reached with the cooperation of Wachovia, in our ongoing
investigation of bid rigging and Antitrust abuses of the municipal bond derivatives market.
Municipal bond derivatives are contracts that tax-exempt issuers use to reinvest proceeds
of bond sales until the funds are needed, or to hedge interest-rate risk. In April 2008, the states
began investigating allegations that certain large financial institutions, including national banks
and insurance companies, and certain brokers and swap advisors, engaged in various schemes to
rig bids and commit other deceptive, unfair and fraudulent conduct in the municipal bond
501 Washington Avenue Montgomery, AL 36104 (334) 242-7300
www.ago.alabama.gov Page 2 of 2
The investigation, which is still ongoing, revealed collusive and deceptive conduct
involving individuals at Wachovia and other financial institutions, and certain brokers with
whom they had working relationships. The wrongful conduct took the form of bid-rigging,
submission of non-competitive courtesy bids and submission of fraudulent certifications of
compliance to government agencies, among others, in contravention of U.S. Treasury
Regardless of the means used to carry out the various schemes, the objective was to
enrich the financial institution and/or the broker at the expense of the issuer – – and ultimately
taxpayers – – depriving the issuer of a competitive, transparent marketplace. As a result of such
wrongful conduct, state, city, local, and not-for-profit entities entered into municipal derivatives
contracts on less advantageous terms than they would have otherwise.