Wells Fargo and KPMG Agree to Settle Wachovia Section 11 Claims for $627 Million

On August 5, 2011, Wells Fargo and KPMG announced an agreement to settle with a class of investors asserting claims based on Wachovia’s 2006 acquisition of Golden West Financial Corp., a mortgage originator based in California. Wells Fargo has agreed to pay $590 million, and KPMG will pay $37 million, for a total settlement value of $627 million. In the suit, brought in 2008 in New York federal court, plaintiffs alleged Golden West originated loans that allowed borrowers to choose from a number of payment options, including payment for less than the interest due, called “Pick-A-Pay” loans. The complaint further alleged that when Wachovia acquired Golden West it began selling the “Pick-A-Pay” loans, as opposed to the traditional, less risky fixed-rate loans, without adequately disclosing the risks to investors or valuing these loans properly on its balance sheet. Plaintiffs brought claims under Sections 11, 12(a)(2), and 15 of the ’33 Act. The settlement was preliminarily approved by Judge Richard Sullivan of the Southern District of New York on August 9, 2011, and is set for a final settlement hearing in November 2011. Motion.

Several Institutional Investors Sue Countrywide In California Federal Court Over Misstatements Regarding Loan Quality

On July 28, 2011, several institutional investors filed a complaint against Countrywide Financial, Bank of America, several former Countrywide officers, and KPMG in the Federal District Court for the Central District of California. Plaintiffs allege that Defendants made false and misleading statements regarding the quality of loans originated by Countrywide, which allegedly inflated the value of Plaintiffs’ Countrywide securities, in violation of Sections 10(b), 20(a), and 20A of the Exchange Act and Sections 11, 12(a)(2), and 15 of the Securities Act. Plaintiffs opted out of the recently-settled class action against Countrywide to pursue their own claims. Complaint.