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Wachovia Corporation Summary: The complaint alleges that Defendants misled investors by falsely representing that Wachovia had strict and selective underwriting and loan origination practices and a conservative lending approach that set it apart from other lenders. Such reassurances were repeated by defendants throughout the Class Period in order to artificially support Wachovia's stock price in the midst of a weakening mortgage market. In response to increased market concern with the mortgage lending industry, and Wachovia's option ARMs in particular, Wachovia falsely represented that its loan underwriting practices were much better than at other banks and that this would allow it to prosper while lenders with less exacting standards and procedures would fare much worse. In reality, Wachovia's actual lending practices differed materially from the description of those practices in statements made to investors. The Company's ability to weather the deterioration in the real estate and credit markets was grossly exaggerated by Defendants, at precisely the worst time, when analysts began to ask tough questions. The Company, moreover, had inadequate loan loss reserves and falsely represented that its capital position was sufficient to fund its dividend. Shortly after last assuring the market of its liquidity, the strength of its underwriting practices, and the adequacy of its reserves, Wachovia reported a surprise quarterly loss, undertook emergency measures to increase capital, and cut its dividend. On April 14, 2008, before the open of ordinary trading, Wachovia reported a loss of $350 million, or $0.20 per share, for the first quarter of 2008. The Company attributed the results to: (1) a $2.8 billion increase credit loss reserves, including $1.1 billion specifically for "Pick-A-Pay" reserve build, the lending program highly touted by the Company during the Class Period. The need to increase Pick-A-Pay reserves was attributed to Wachovia's adoption of a "refined reserve modeling" that resulted in "higher than expected loss factors on Pick-a-Pay"; and (2) $2 billion in mark-to-market losses for mortgage backed securities, including a "$729 million loss on unfunded leveraged finance commitments." In order to shore-up its capital, Wachovia announced the following steps: (1) reduce the dividend 41% to $0.375; and (2) plan to raise capital by $7-8 billion through public offerings. In reaction to the news, shares fell from $27.81 to $25.55 (8.13%) on abnormally high volume.
This marks the third separate action filed against Wachovia in 2008. The other two cases are related to Auction Rate Securities and stock offerings.
INDUSTRY CLASSIFICATION:
SIC Code: 6021
Sector: Financial
Industry: Money Center Banks
| COMPANY/ISSUER NAME: | Wachovia Corporation |
| COMPANY/ISSUER TICKER: | WB |
| COMPANY WEBSITE: | http://www.wachovia.com |
| FIRST IDENTIFIED COMPLAINT IN THE DATABASE | |||||||||||||||||
| Bristol County Retirement System, et al. v. Wachovia Corporation , et al. | |||||||||||||||||
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| DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT | |||
| Class Action Complaint for Violations of Federal Securities Laws - Jury Trial Demanded | |||
| Type: Complaint | Date on the document: 6/6/2008 | ||
| U.S. District Court Civil Docket | |||
| Type: Docket | Date on the document: 9/3/2008 | ||
| OTHER DOCUMENTS | |||
| Complaint For Violation Of The Federal Securities Laws | |||
| Case Name and/or Number: Morton Lipetz, et al. v. Wachovia Corporation , et al. | |||
| Type: Complaint | Date on the document: 7/7/2008 | ||
| Class Action Complaint For Violations Of Sections 11, 12(a)(2) And 15 Of The Securities Act Of 1933 – Demand for Jury Trial | |||
| Case Name and/or Number: Orange County Employees' Retirement System, et al. v. Wachovia Corporation , et al. | |||
| Type: Complaint | Date on the document: 01/21/2009 | ||
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