Wells Fargo/Wachovia Settles CDO Price-Gouging Charges


Wells Fargo & Co. has agreed to pay $11.2 million to settle SEC charges that Wachovia Capital Markets LLC sold mortgage-backed securities called collateralized debt obligations (CDOs) at prices that were 70% higher than its own estimate of the mark-to-market value of the securities, according to articles by Liz Skinner of InvestmentNews (“Wells Fargo to pony up $11.2M for allegedly overcharging Zunis, other investors”) and Dan Fitzpatrick and Jean Eaglesham of the Wall Street Journal (“Wachovia Targeted Over Sales of CDOs”).

The securities were sold to the Zuni American Indian Tribe and other individuals. The SEC action is part of a larger probe into Wall Street firms’ sales of $1 trillion of CDOs. The SEC has reportedly subpoenaed documents from Citigroup, Deutsch Bank, JPMorgan and UBS. The SEC is currently in settlement discussions with a number of firms, according to the WSJ article.

Wall Street firms have been inundated with litigation and regulatory actions arising out of their conduct in precipitating the financial crisis by creating, buying and selling trillions of dollars of complex and illiquid securities backed by high-risk subprime mortgages.

“Wachovia caused significant losses to the Zuni Indians and other investors by violating basic investor protection rules ? don’t charge secret excessive markups and don’t use stale prices when telling buyers that assets are priced at fair market value,” Robert Khuzami, director of the SEC’s Division of Enforcement, was quoted as saying.

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. Page Perry’s attorneys have extensive experience in representing investors in CDO matters. For further information, please contact us.