DES MOINES, Iowa—Wells Fargo & Co. said Tuesday it has agreed to pay at least $37 million in a lawsuit which alleges several banks rigged bidding competitions to win business from state and local governments.
Banks help municipalities invest the money they raise from bond offerings to earn interest before paying for projects. They compete by submitting to state and local governments the best yield they can offer.
The lawsuit alleges several banks rigged the process and deprived governments of a true competitive process that would produce the best returns on their investments.
The lawsuit was consolidated from several states cases into the Southern District of New York in 2008.
It alleges many top investment banks conspired to rig the bidding process, "sharing their illegal gains through kickbacks to one another, and making other secret, undisclosed arrangements."
Among those named are Wells Fargo and Wachovia Bank, which Wells acquired in 2008.
Wells Fargo said Tuesday in a regulatory filing that it reached a settlement on Oct. 21.
A spokeswoman said Wells Fargo never had a significant presence in the municipal bond market business and the company's primary involvement was through Wachovia.
"We're pleased to resolve this legacy Wachovia matter which relates to events that occurred prior to the Wells Fargo merger," spokeswoman Dana Obrist said.
If approved by the court, the San Francisco-based bank will pay $37 million or an amount equal to 65 percent of the restitution in a future settlement, if one is reached, with various state attorneys general investigating Wachovia.
The settlement agreement is expected to be filed with the court by the end of the month.
Wells Fargo sets aside money to cover legal costs and said pending litigation including the municipal bond case would not have a material adverse effect on its financial position.
Other banks have reached agreements to settle with some of the parties in the case.
In July JPMorgan Chase & Co. agreed to pay $211 million. J.P. Morgan Securities LLC made at least 93 secret deals with companies that handled the bidding processes in 31 states, the Justice Department and Securities and Exchange Commission said. Those deals allowed the bank to peek at competitors' offers.
Wells Fargo shares rose 84 cents, or 3.3 percent, to $26.26 in early afternoon trading. They're off 15 percent since the beginning of the year and have traded as high as $34.25 in the past 52 weeks.