On February 29, 2008, the case was removed from Supreme Court of the State of New York, County of Nassau, to the U.S. District Court for the Eastern District of New York. According to the complaint originally filed in the Supreme Court of the State of New York, County of Nassau, this is a securities class action on behalf of all persons who acquired the preferred stock of Wachovia Corporation pursuant and/or traceable to a false and misleading registration statement and prospectus issued in connection with the Company’s May 2007 offering of the Company’s 6.375% Trust Preferred Securities. This action asserts strict liability claims under the Securities Act of 1933 against Wachovia, its senior insiders, the Wachovia trust which issued the securities, and the investment banks which underwrote the May 2007 Offering.
Defendant Wachovia is registered as a financial holding company and a bank holding company, and provides commercial and retail banking and trust services through full-service banking offices. Wachovia is headquartered in Charlotte, North Carolina and has branch offices in the United State and around the globe.
Defendants consummated Wachovia’s Offering pursuant to the false and misleading Registration Statement, selling 30 million shares at $25 per share, for proceeds of approximately $750 million.
Wachovia ultimately announced huge charges associated with its mortgage portfolio, causing the price of Wachovia’s common stock and the preferred securities issued in the Offering to decline.
The true facts which were omitted from the Registration Statement were: (a) Defendants’ portfolio of collateralized debt obligations (CDOs) contained billions of dollars worth of impaired and risky securities, many of which were backed by subprime mortgage loans; (b) Defendants failed to properly account for highly levered loans such as mortgage securities; and (c) Wachovia had been heavily involved in mortgages involving the pay-option adjustable rate mortgage (ARMs). These pay-option ARMs provided that, during the initial term of the loan, borrowers could pay only as much as they desired with any underpayment being added to the loan balance. These loans would become toxic (for both Wachovia and the borrowers) once house prices stopped increasing at a rapid rate.
On January 16, 2009, the plaintiff in the action pending in the U.S. District Court for the Eastern District of New York, filed a notice voluntarily dismissing the action.
In March 2009, three similar class action complaints were transferred from the Superior Court of the State of California, Alameda County, to the U.S. District Court for the Northern District of California. One of these actions was the plaintiff who filed initial complaint, which was later voluntarily dismissed on January 16, 2009. In July 2009, these actions were transferred to the U.S. District Court for the Southern District of New York.
On August 21, 2009, Judge Richard J. Sullivan signed the Order consolidating the related actions. According to the Order, the three Securities Act Actions shall be consolidated. The docket number of the Miller Action, No. 09 Civ. 6351, shall constitute the Master File Number for the Securities Act Actions and any similar actions filed subsequently. The consolidated action shall be referred to as In re Wachovia Preferred Securities and Bond/Notes Litigation. The appointment of Bernstein Litowitz Berger & Grossmann LLP, Barroway Topaz Kessler Meltzer & Check, LLP and Coughlin Stoia Geller Rudman & Robbins LLP as Co-Lead Counsel in In re Wachovia Preferred Securities and Bond/Notes Litigation by the California Court is hereby affirmed. The institutional clients of Co-Lead Counsel, Orange County Employees' Retirement System, Louisiana Sheriffs' Pension and Relief Fund, and Southeastern Pennsylvania Transportation Authority, shall serve as Co-Lead Plaintiffs in In re Wachovia Preferred Securities and Bond/Notes Litigation. Lead Plaintiffs in In Re Wachovia Preferred Securities and Bond/Notes Litigation shall file a consolidated complaint in that action on or before September 4, 2009.
On September 4, 2009, the lead plaintiffs filed a Consolidated Class Action Complaint. The defendants responded by filing three motions to dismiss the Consolidated Class Action Complaint on November 3, 2009. On May 3, 2010, the plaintiffs were given leave to amend their complaint and the pending motions to dismiss were terminated as moot. On May 28, 2010, the plaintiffs filed an Amended Consolidated Complaint. On July 14, 2010, the defendants filed motions to dismiss the Amended Consolidated Complaint.
On April 1, 2011, Judge Richard J. Sullivan signed the Opinion and Order granting, denying, and granting in part and denying in part the defendants' motions to dismiss.
On August 5, 2011, motion to preliminarily approve a settlement was filed.
According to an article dated August 8, 2011, in what is the largest settlements so far to arise out of the subprime meltdown-related securities class action litigation wave, and apparently the largest settlement ever of a securities suit filed solely under the Securities Act of 1933, the parties to the consolidated Wachovia Preferred Securities and Bond/Note Litigation have collectively agreed to settle the suit for a total of $627 million. The settlement is subject to court approval. The settlement amount of $627 million represents two different settlement funds: $590 million on behalf of the Wachovia defendants, including 25 former directors and officers of Wachovia, as well as 72 different financial firms that underwrote bond offerings for Wachovia between 2006 and 2008; and $37 million on behalf of Wachovia’s auditor, KPMG. According to data from Institutional Investor Services, the collective $629 million settlement, if approved, would represent the fourteenth largest securities class action settlement of all times.
On August 9, 2011, the Court issued an Order of Preliminary Approval of the settlement. The settlement was finally approved on January 3, 2012.