San Francisco Citizen

California State Attorney General Jerry Brown is announcing a huge, “b”-as-in-boy, $1.4 billion settlement with affiliates of Well Fargo today. That means that if you bought certain auction-rate securities based on “misleading advice” from any of three Wells affiliates, well, you’re going to get your money back. Hurray!

All the deets are below.

El Protector De La Gente, Jerry Brown:

Here they are:

“Attorney General Edmund G. Brown Jr. today announced a landmark $1.4 billion settlement with three Wells Fargo affiliates to pay back investors, charities and small businesses that purchased auction-rate securities based on “misleading advice.”

“Wells Fargo convinced thousands of investors to purchase auction-rate securities with promises of robust returns and liquidity, but when the market collapsed, investors were left out in the cold,” Brown said. “Based on misleading advice, investors bought these risky securities. Now, retail investors and small businesses are finally getting their money back.”

Under today’s settlement, Wells Fargo will buy back $1.4 billion in non-liquid auction-rate securities from thousands of retail customers, charities, and small businesses nationwide, including about $700 million to California investors. Wells Fargo will also pay legal costs and future monitoring expenses incurred by Brown’s office. In February 2008, nationwide auction markets froze, and investors have been unable to sell their securities.

Earlier this year, Brown filed the suit against three Wells Fargo affiliates-Wells Fargo Investments, LLC; Wells Fargo Brokerage Services, LLC; and Wells Fargo Institutional Securities, LLC-for violating California’s Securities Law. Brown’s suit contended that Wells Fargo routinely misrepresented, marketed and sold auction-rate securities as safe, liquid and cash-like investments, omitting material facts.

The company was also charged with failing to supervise and train its sales agents and selling unsuitable investments. The lawsuit contended that Wells Fargo ignored clear industry and internal warnings about risk and previous auction failure.

In March 2005, the Securities and Exchange Commission (SEC), the “Big 4″ accounting firms, and the Financial Accounting Standards Board all determined that auction-rate securities should not be considered “cash equivalents.” Despite these warnings, Wells Fargo continued to aggressively sell and falsely market auction-rate securities as safe, liquid, cash-like investments until the nationwide auction markets froze in early 2008.

In marketing and selling these investments, Wells Fargo failed to inform investors about how auction-rate securities or the auction process worked, as well as the risks and consequences of auction failure.”

Ever more deets, after the jump.

Here are the recitals. Click herefor the whole pdf.

SETTLEMENT AGREEMENT

This settlement agreement (“Agreement”) is entered into between Wells Fargo

Investments, LLC (“WFI”) and Wells Fargo Securities, LLC, successor by merger to Wells

Fargo Brokerage Services, LLC, and Wells Fargo Institutional Services, LLC (collectively, the

“Wells Fargo Institutional Broker-Dealers”), on one side, and the People of the State of

California, by and through Attorney General Edmund G. Brown Jr. or his designated

representative (“Attorney General”), on the other side (collectively the “Parties”).

RECITALS

WHEREAS, on April 23, 2009, the Attorney General filed suit, pursuant to California

Government Code §§ 12658 and 12660, against WFI and the Wells Fargo Institutional Broker-

Dealers alleging violations of the Corporate Securities Law of 1968 (“CSL”) titled

the State of California v. Wells Fargo Investments, LLC, Wells Fargo Brokerage Services, LLC,

and Wells Fargo Institutional Services, LLC,

CGC 09-487641) (“Action”);

WHEREAS, the Attorney General, WFI and the Wells Fargo Institutional Broker-Dealers

are willing to accept the terms of the Agreement to resolve all issues and disputes related to the

Action on the terms and conditions set forth below;

WHEREAS, WFI and Wells Fargo Institutional Broker-Dealers, without admitting the

allegations in the Action, enter into this Agreement and agree to abide by the terms and

conditions set forth below…

 

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