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DOJ Wachovia Bid Rigging Settlement Criticized
December 13, 2011
The U.S. Justice Department and the Securities and Exchange Commission announced on December 9, 2011, that Wachovia, now owned by Wells Fargo, will pay $148 million to settle allegations of bid rigging and kickback schemes for municipal bond contracts.
The San Francisco Chronicle reported that Wachovia allegedly shared information with other banks on multimillion-dollar municipal contracts. The contracts, which should be competitively bid, "were secretly carved up among the banks in a cartel-like arrangement." Financial institutions that have won these guaranteed investment contracts invest local bond money so as to "generate a higher rate of interest than those put into a traditional savings account." However, in many cases the banks paid municipalities "less interest than comparable market rates, costing the municipalities hundreds of millions of dollars."
Under the terms of the settlement, Wachovia did not admit or deny the allegations levied against it.
Lieff Cabraser represents the city of Oakland, Alameda County, Fresno, and the Fresno County Financing Authority in civil suits against banks for alleged bid rigging. In the Chronicle article, Lieff Cabraser attorney Eric Fastiff stated, "The bid rigging involved billions of dollars of municipal debt and taxpayer money. The settlements to date, including this one, appear to be pennies on the dollar."