Wells Fargo & Co. is the third of seven big bank holding companies, sued by Philadelphia and Baltimore last winter for allegedly ripping off taxpayers with overpriced bonds, to be dismissed from the lawsuit after the bank convinced the court that the parent corporation didn’t make money from the alleged overpricing, news agency Reuters reported.
The San Francisco-based bank was removed as a defendant from the federal lawsuit in New York after showing it “did not remarket, provide letters of credit for, or manage money market funds that invested in the bonds,” the news agency reported, citing court filings.
UPDATE 6/27: “Philly and Baltimore signed a perfunctory stipulation with the banks to drop various holding companies while we pursued claims against their affiliates/subsidiaries,” but Wells Fargo Bank NA, Wells Fargo Securities LLC and other subsidiaries are still defendants, city spokesman Mike Dunn said today.
JPMorgan, Chase & Co. of New York and Fifth Third Bancorp were previously dismissed, though subsidiaries remain defendants in the civil case. Bank of America, Barclays, Citigroup, Goldman Sachs and Royal Bank of Canada are still defending themselves from the complaint.
Philadelphia issued more than $1.6 billion of the bonds, and Baltimore issued more than $250 million. The disputed payments were a small fraction of the bond values, but Philadelphia’s legal counsel demanded damages far in excess of the actual losses. The cities claimed the banks arranged for them to pay above-market rates, leaving less money available for school funding and other city needs.
Wells Fargo is the successor to the former First Union National Bank and its local predecessors, including CoreStates, Philadelphia National and First Pennsylvania banks, which formerly employed thousands of local residents and included city government’s leading financial computer services suppliers.
The city has filed a series of complaints against the bank in recent years, and the bank has substantially reduced its employment in Center City. Formerly a financial center, Philadelphia no longer has a large concentration of commercial banking jobs compared to its population — in contrast with the nearby Wilmington, Del. area, which is home to one of the largest banking and financial employment centers in the country, according to a study released by the Delaware state economic development office last week.
But Wells Fargo, which has the nation’s largest bank branch network, remains a popular supplier of financial services to Philadelphia city agencies. Despite suing Wells Fargo and Barclays, Philadelphia hired both banks to lead a new bond offering in May.