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Wachovia to pay $58.75M in multistate settlement

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Wachovia Bank, which was acquired by Wells Fargo Bank in December 2008, has agreed to pay $58.75 million as part of a multistate settlement, including Missouri, stemming from allegations of anticompetitive and fraudulent conduct in the municipal bond derivatives industry, according to a Dec. 8 news release from Missouri Attorney General Chris Koster's office.

As part of the settlement with 26 attorneys general, Wachovia has agreed to pay $54.5 million in restitution to affected state agencies, municipalities, school districts and nonprofit agencies nationwide that entered into municipal derivative contacts with Wachovia between 1998 and 2004. Additionally, Wachovia will pay a $1.25 million civil penalty and $3 million for fees and costs of the investigation to the settling states.

"(The) settlement will help to repay the cities, taxpayers, and not-for-profit organizations that earnestly believed financial institutions like Wachovia were engaged in competitive bidding and fair dealing, which we now know was not the case,” Koster said in the release.   

The multistate settlement is part of a broader $148 million settlement. Last week, Wachovia also entered into agreements with the U.S. Department of Justice's Antitrust Division, the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Internal Revenue Service.

Wachovia is the fourth financial institution to settle with the multistate task force in an ongoing investigation concerning municipal bond derivatives. Settlements - also reached with Bank of America, UBS AG and JP Morgan - to date total nearly $310 million.

In April 2008, the states began investigating allegations that certain financial institutions were rigging bids and engaging in other fraudulent conduct in the municipal bond derivatives market.

Municipal bond derivatives are contracts that tax-exempt issuers use to reinvest proceeds of bonds sales, according to the release.[[In-content Ad]]

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