Missouri announces agreement with Wachovia

The "nightmare" is over for thousands of investors whose money was tied up in auction-rate securities purchased through Wachovia Corp., Missouri Secretary of State Robin Carnahan said Friday in announcing an $8.5 billion settlement with the company.

Wachovia, along with state and federal regulators, announced a settlement that calls for the Charlotte, N.C.-based bank to buy back $8.5 billion in auction-rate securities. Carnahan's office was the lead negotiator with Wachovia.

The company also agreed to pay $50 million in fines to be distributed among all 50 states. Carnahan said the amount Missouri will get has not been determined.

Carnahan said that since the collapse of the auction-rate securities market in February, investors needing to access their money for retirement, medical bills and other debts have been unable to do so, even though Wachovia brokers peddled the securities as "cash equivalents, like a money market."

"This nightmare is finished so they can get on with their lives," Carnahan said.

Wachovia is the fifth bank to agree to repurchase the troubled securities over the past two weeks, following Citigroup Inc., UBS AG, JPMorgan Chase & Co. and Morgan Stanley.

Auction-rate securities are investments that resembled corporate debt, but their interest rates were reset at regular auctions. The market for the securities collapsed in February amid deterioration in the broader credit markets.

In July, securities regulators from Missouri and several other states went to Wachovia's St. Louis offices and requested documents and records related to auction-rate securities. Wachovia uses St. Louis as headquarters for its securities division.

The investigation was civil only. Carnahan would not speculate on the possibility of criminal charges.

The settlement involves more than 40,000 investors nationwide. Carnahan wasn't certain how many Missourians were impacted but said her office has received hundreds of calls from Wachovia customers, and 70 filed formal complaints.

Carnahan said the $5.7 billion in investments held by individuals, charities and small businesses will be returned by Nov. 28. The rest, held by larger firms, will be returned by June 30, she said.

Dan Gregus, assistant regulatory director for the Securities and Exchange Commission office in Chicago, declined to speculate on additional fines.

"Right now, our primary interest is getting money back to investors as quickly as possible," he said.

Wachovia admitted no wrongdoing in agreeing to the settlement. Robert K. Steel, president and chief executive officer of Wachovia, said "unprecedented" market conditions created difficulties for the company's clients, particularly those holding auction-rate securities.

"We are pleased to announce a comprehensive solution for the liquidity needs of clients who purchased auction-rate securities at Wachovia and to resolve this matter with federal and state regulators," Steel said in a news release.

Carnahan said that as part of the agreement, Wachovia will provide no-cost loans to those who need access to their money prior to completion of the buyout.

Carnahan does not believe the company intentionally misled investors. She said brokers simply weren't aware of the risk involved in auction-rate securities and the company failed to provide adequate supervision of them.

"It's really point of sale — what they should have told investors," Carnahan said.

___

Missourians with questions about auction-rate securities may reach Carnahan's office at 1-800-721-7996.

___

On the Net:

Missouri Secretary of State: http://www.sos.mo.gov

Wachovia Corp.: http://www.wachovia.com

Back To Top

	Merrill facing NY lawsuit over securities sale	Associated Press	Mon Aug 11	0
	Wachovia latest to settle securities probe	Associated Press	Fri Aug 15	0
	Merrill to face legal action for securities sale	Associated Press	Fri Aug 15	0
	AP source: Wachovia near auction-rate agreement	Associated Press	Thu Aug 14	0