Day 128 or so:
Day 128 or so:
Assemblymember Fiona Ma, who represents the interests of San Francisco’s west siiiiide in Sacramento, will be in the bowels of the San Francisco State Building at 455 Golden Gate Ave tonight at 7:oo P.M. to host a special constitutional convention panel being thrown by the San Francisco Young Democrats.
All the deets after the jump. See you there!
Combative California Attorney Jerry Brown held a news conference today that was all about a $1.5 b as in “boy” billion dollar lawsuit against three affiliates of Wells Fargo Bank concerning auction rate securities. Approximately 2000 upset investors will be cheering this action on. But let’s hear the rejoinder from Wells:
“Wells Fargo Investments Chief Executive Charles Daggs said that ‘Wells Fargo could not have predicted these extraordinary circumstances, and even with the benefit of hindsight is not responsible for them.'”
O.K. then, on with the lawsuit.
Brown and Brown, together again. “I’m a reporter” Willie Brown grills Jerry Brown after the press conference in the Civic Center State Building:
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Here’s the full skivvy from Director of Communications Scott Gerber:
Brown Sues Wells Fargo Affiliates to Recover $1.5 Billion for Defrauded California Investors
Attorney General Edmund G. Brown Jr. today filed suit against three Wells Fargo affiliates to recover $1.5 billion for California investors who purchased auction-rate securities based on “false and deceptive” advice that these financial instruments were “as safe and liquid as cash.”
“Wells Fargo’s affiliates promised investors auction-rate securities were as safe and liquid as cash, when in fact they were not, and now investors are unable to get their money when they need it,” Attorney General Brown said. “This lawsuit seeks to recover $1.5 billion for Californians and holds these companies accountable for giving investors false and deceptive advice.”
Auction-rate securities are investments with long-term maturity dates (e.g., bonds) that Wells Fargo and other banks marketed as short-term investments equivalent to cash. These investments paid a slightly better rate of return than a bank account. And, investors could sell the securities at regular weekly or monthly auctions which provided the promise of liquidity.
In February 2008, these auctions froze up nationwide, and investors were no longer able to redeem their securities for cash, as promised. This left approximately 2,400 Californians who had invested with Wells Fargo without access to more than $1.5 billion. Almost 40% of Wells Fargo’s auction-rate securities were held by Californians, far more than any other state nationwide.
By August 2008, major financial institutions including UBS, Citigroup, Wachovia, and Merrill Lynch met their obligations to investors and restored the cash value of these securities. The three Wells Fargo affiliates, however, have refused to do so.
Consequently, Attorney General Brown filed his complaint in San Francisco Superior Court today to restore the cash value of these securities, force the companies to disgorge any subsequent profits tied to the securities, and obtain civil penalties of $25,000 per violation. This could amount to hundreds of millions in civil penalties.
The suit contends that three Wells Fargo’s affiliates – Wells Fargo Investments, LLC, Wells Fargo Brokerage Services, LLC, and Wells Fargo Institutional Securities, LLC – violated California’s Securities Law by:
– Routinely misrepresenting, marketing and selling auction-rate securities as safe, liquid and cash-like investments similar to certificates of deposit or money-market accounts and omitting material facts in violation of California Corporations Code 25401;
– Offering and selling, as a broker-dealer, securities by means of a manipulative, deceptive or other fraudulent scheme, device, or contrivance in violation of California Corporations Code 25216(a);
– Marketing and selling auction-rate securities to investors for whom these investments were unsuitable in violation of California Corporations Code 25216(c) and California Code of Regulations, title 10, section 260.218.2; and
– Failing to supervise and adequately train sales agents pushing these investments in violation of California Corporations Code 25216(c) and California Code of Regulations, title 10, section 260.218.4.
In marketing and selling these investments, Wells Fargo’s affiliates ignored clear industry and internal warning 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’s affiliates continued to aggressively sell and falsely market auction-rate securities as safe, liquid, cash-like investments until the nationwide auction markets froze in February 2008.
In marketing and selling these investments, Wells Fargo’s affiliates failed to inform investors about how auction-rate securities or the auction process worked and the risks and consequences of auction failure.
Following the collapse of these auctions, Wells Fargo’s affiliates took advantage of the situation and offered loan programs to those who needed immediate access to the money tied up in these investments.
Investments ranged from $25,000 to millions, and investors included small businesses and small business owners, retirees, married couples, and other hard working Californians. These investors were led to believe they were putting their savings and assets into a safe and accessible place, but instead, they were left without access to their cash, leading to serious hardship. For example:
– A Southern California woman suffering from lung cancer and needing extra funds to help treat her illness sold her home and put the money into a Wells Fargo savings account. A Wells Fargo agent later recommended she put the money into an account with a higher interest rate. When the woman told the agent she needed to access the money and could not afford to lose any of it, she was reassured that her money would be safe like cash. Without disclosing the nature of the investment, the agent invested the funds in auction-rate securities and when the auctions failed, the woman could not access her money.
– A Bay Area company invested $400,000 in a money market account until it was solicited by phone to invest in what was described to them as a liquid, money market-like-account. They were told the only difference was the amount of notice needed to pull the funds (one week vs. one day). The funds were intended to help the business expand, but after the auctions failed, employees were instead laid off. The company was never informed that they were investing in auction-rate securities or that there were substantial risks tied to the investment.
Attorney General Jerry Brown, Supervisors David Campos, Bevan Dufty and Eric Mar, Debra Walker, Ina Dearman, Jane Morrison, Anita Sanchez, Norm Rolfe, Rink, Roma Guy, Michael Goldstein, Maggie Rubenstein, Libby Denebeim, Roma Guy, Marie Jobling and Dennis Kelly.
So many people came that a traffic jam occurred at the metal detector station in the lobby.
District Director Kimberly Alvarenga and Tom spoke with constituents of the 13th Assembly District:
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Good luck, Tom!
Why? Because it’s resting on 288 eight-foot hydraulic seismic dampers. Like this one:
You see, they’ve helpfully cut a hole in the wall just to show you one. It looks at first as if it’s some kind of sculptured art. Read the sign for details:
So when the big shake comes, you won’t feel a thing. Hurray!