Wells Fargo Settles Bid-Rigging Case with Municipalities (WFC)

Wells Fargo & Co. (NYSE: WFC) today settled a bid-rigging case with municipalities, which sued the bank over the way it conducted bond auctions.

Wells Fargo would pay at least $37 million to the municipalities that sued the bank. The bank disclosed the details about the settlement, which was reached on October 21, in its quarterly filing today.

Although Wells Fargo reached a settlement with the municipalities, the bank may have to pay more if it decides to settle the case with a number of state attorney generals, who are also investigating the bid-rigging issue. The settlement with municipalities requires approval from the court, a spokeswoman for the bank today said. The bank has not yet reached any agreement with any of the state attorneys general investigating the issue.

Wells Fargo is also being investigated by the Department of Justice and the SEC over the same issue.

Almost 40 municipalities from across the U.S. had alleged that banks distorted the bidding process, which resulted in lower investment returns for them. As per the federal tax laws, municipalities are required to invest the proceeds from bond sales at fair-market value. In a bidding process, which is organized by bidding agents, banks compete on bids to win the investment business in order to ensure the fair market value test is met.

In the civil suit, the municipalities allege that the banks, including Wells Fargo, conspired to divide the market between themselves and this led to lower returns on investments for the municipalities.

The municipalities filed a consolidated civil suit against the banks. Other banks facing the allegations include JP Morgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC) and UBS AG (NYSE: UBS). All three banks have settled with federal authorities, however, they are yet to settle the civil consolidated case.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.