According to a press release dated March 1, 2006, a long-running shareholder lawsuit against Wachovia Corp. was dismissed in January in the U.S. District Court for the Western District of North Carolina, the Charlotte bank said in its annual 10-K filing Tuesday. The class action, filed in 1999 against predecessor First Union Corp., initially alleged violations of federal securities law involving the 1998 acquisitions of CoreStates Financial Corp. and The Money Store Inc. An amended complaint later only alleged problems with First Union's Money Store acquisition. A Wachovia spokeswoman said the company could not comment beyond the filing. In the filing, Wachovia also said it reached an undisclosed settlement in February with Bluebird Partners LP over a long-running dispute over the handling of collateral in Continental Airlines' 1990 bankruptcy filing by a Wachovia predecessor. The Supreme Court of the State of New York in 2005 last year entered a $32.9 million judgment against Wachovia, but both parties filed appeals.
As summarized by the Company's FORM 10-K for the fiscal year ended December 31, 2002, in January 2001, the U.S. District Court for the Western District of North Carolina granted Wachovia's motion to dismiss the litigation for failure to state a claim upon which relief could be granted. Although the plaintiffs did not appeal this ruling, they sought, and received permission to file an amended complaint. In August 2001, plaintiffs filed an amended complaint that abandoned their previous allegations concerning the CoreStates Financial Corp merger and primarily raised new allegations of irregularities at The Money Store, Inc. (TMSI) prior to its acquisition by Legacy First Union. In October 2001, Wachovia filed a motion to dismiss the securities litigation consolidated in the U.S. District Court for the Western District of North Carolina. In September 2002, the court granted the motion in part, limiting any new complaint to claims regarding alleged misstatements or omissions plead in earlier complaints. The plaintiffs filed a third consolidated and amended complaint in October 2002, purportedly on behalf of a class of purchasers of our common stock during the period from March 4, 1998 to May 24, 1999. The complaint alleges, among other things, that First Union disregarded problems at TMSI and did not write down goodwill from the TMSI acquisition soon enough. Defendants filed a motion to strike portions of this complaint.
A number of purported class actions were filed in June through August 1999 against the Company in the United States District Courts for the Western District of North Carolina and for the Eastern District of Pennsylvania. These actions named Wachovia and certain of its executive officers as defendants and were purported to be on behalf of persons who purchased shares of its common stock from August 14, 1998, through May 24, 1999. These actions were consolidated into one case in the U.S. District Court for the Western District of North Carolina in October 1999. These complaints alleged various violations of federal securities law, including violations of Section 10(b) of the Exchange Act, and that the defendants made materially misleading statements and/or material omissions which artificially inflated prices for our common stock. The complaints alleged that management failed to disclose integration problems in the CoreStates Financial Corp merger and misstated the value of our interest in certain mortgage-backed securities of The Money Store, Inc. ('TMSI') acquired by Legacy First Union on June 30, 1998. Plaintiffs sought a judgment awarding damages and other relief.
The first complaint filed specifically alleges that First Union and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. According to the complaint, during the Class Period, defendants issued a series of materially false and misleading public statements about First Union's operations, its operating results and integration of operations with the Money Store Inc. and CoreStates Financial Corporation. The complaint further alleges that the issuance of these false and misleading statements caused the price of First Union's common stock to be artificially inflated during the Class Period.