Muni bond-rigging civil suit close to settlement with Wells Fargo
Along with J.P. Morgan Chase & Co., Bank of America Corp. and UBS AG, which settled earlier, Wells Fargo is close to settlement with municipalities over a muni bond-rigging civil suit. The other three mega banks had settled with the municipalities and federal authorities for a combined total of more than $500 million.
David Benoit of Marketwatch.com reported in “Wells Fargo to settle muni bond-rigging civil suit” that the allegations of bid rigging go back to the late 1990s and early 2000s and involved dozens of states.
The municipalities that bought the bonds were put at a severe disadvantage by the alleged collusive practices of the banks and bidding agents who somehow managed to manipulate the process so that the banks would end up both winning and losing the auction. As a result, the municipalities ended up with reduced potential payouts.
Municipal bonds are generally tax-exempt debt obligations issued by state or local governments to finance public projects such as schools, parks, highways, hospitals or sewer systems. Buyers of the bonds are essentially lending money to the municipalities in return for payment at a specified rate of interest.
Wells Fargo reportedly agreed to pay at least $37 million but could potentially pay more if it settles the allegations with various states' attorneys general. The future payouts could be about 65 percent of any settlement with law enforcement, if the amount was greater.
Attorneys for the earlier settlements were reputed to be seeking more in settlements and were not pleased with the earlier agreements. The Wells Fargo agreement has not yet been court-approved.
Information in this post gathered in association with a Criminal Law Attorneys in Reno.
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