NEW YORK - (Mealey's) In what Wachovia Corp. shareholders' attorneys are calling the single-largest recovery for claims brought "solely pursuant to" the Securities Act of 1933, the shareholders, Wachovia, certain of its affiliates and former officers and directors and outside auditor KPMG LLP have agreed to a $626 million settlement of claims relating to the defendants' alleged misrepresentations in stock-offering documents concerning Wachovia's subprime exposure, according to court documents filed Aug. 5 in New York federal court (In re Wachovia Preferred Securities and Bond/Notes Litigation, No. 09-6351, S.D. N.Y.).
According to the lead plaintiffs' motion for preliminary approval of settlements with Wachovia; certain of its former officers and directors; Wachovia Capital Trust IV, Wachovia Capital Trust IX and Wachovia Capital Trust X (collectively, Wachovia Capital Trusts); and Wells Fargo & Co., as successor-in-interest for Wachovia Corp.; and KPMG, which was filed in the U.S. District Court for the Southern District of New York, the Wachovia defendants will pay $590 million, while KPMG will pay an additional $37 million to settle all claims.
The proposed settlement, which is subject to court approval, will settle the shareholders' Section 11, 12(a)(2) and 15 claims under the Securities Act.
The shareholders contend that the settlement amount, if approved, ranks among the top 15 in securities class action history, as well as the "single-largest recovery for claims brought solely pursuant to the" Securities Act.
Shareholders brought three separate securities class action lawsuits in the Alameda County, Calif., Superior Court beginning on Dec. 19, 2008. The actions were consolidated (collectively, the bond/note actions) and removed to the U.S. District Court for the Northern District of California on March 6, 2009.
The consolidated action was then transferred to the Southern District of New York, and consolidated with two other securities class action lawsuits (collectively, the equity actions). The shareholders filed a second amended complaint, and on March 31, the District Court granted motions to dismiss filed by the Wachovia defendants and KPMG regarding the claims in the equity actions but denied the motions with regard to the Securities Act claims filed by the shareholders in the bond/notes actions.
The bond/notes shareholders represent a class of investors who purchased preferred securities, bonds or notes "in or traceable to publicly registered offerings conducted between July 31, 2006 and May 29, 2008 pursuant to one of five separate shelf registration statements."
The bond/notes shareholders allege that the defendants issued false and misleading statements concerning the quality of Wachovia's mortgage loan portfolio and materially misled investors as to Wachovia's exposure to tens of billions of dollars of losses on mortgage-related assets, including $120 billion in Wachovia's Pick-A-Pay option adjustable-rate residential mortgage loan portfolio, among other things.
[Editor's Note: Full coverage will be in the August issue of the LexisNexis Financial Services Litigation Report. In the meantime, the motion for preliminary approval of settlements is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844. Document #88-110822-001B. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
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