Antitrust Law Daily Wells Fargo dropped from Philadelphia and Baltimore’s bond interest rate rigging case
Wednesday, June 19, 2019

Wells Fargo dropped from Philadelphia and Baltimore’s bond interest rate rigging case

By Peter Reap, J.D., LL.M.

The investment bank stipulated that it did not remarket, provide letters of credit in connection with, or manage money market funds investing in variable rate demand obligations.

In a stipulated order providing for the voluntary dismissal of investment bank Wells Fargo from a lawsuit filed by the cities of Philadelphia and Baltimore alleging that seven major banks in the United States violated the antitrust laws by conspiring to inflate the interest rates for a type of bonds often called Variable Rate Demand Obligations (VRDOs). The cities, on behalf of a proposed class of state and local public entities such as municipalities, agencies, public universities, and hospitals, were allegedly forced by the conspiracy into making billions of dollars in extra interest payments on variable-rate municipal bonds during 2008-2016 (City of Philadelphia v. Bank of America Corp., June 18, 2019, Furman, J.).

Wells Fargo is the third of the seven defendant banks to have been dropped from the suit. JPMorgan, Chase & Co. and Fifth Third Bancorp were dismissed earlier. Remaining as defendants are Bank of America, Barclays, Citigroup, Goldman Sachs and Royal Bank of Canada.

The stipulated order recites that counsel for Wells Fargo and its affiliates has represented that Wells Fargo & Co. is a holding company and did not, during the relevant timeframe, engage in the business of remarketing VRDOs, providing letters of credit in connection with VRDOs, or managing money market funds that invested in VRDOs.

According to the amended complaint, as early as February 2008, the defendants were agreeing among themselves not to compete against each other in the market for remarketing services, but instead were agreeing to keep VRDO rates artificially high, to the detriment of their customers. The defendants’ overarching objective was to ensure that the cartel members would keep VRDO rates artificially high in order to prevent investors from "putting" the bonds back to the defendants. The conspiracy restrained competition in the market for VRDO remarketing services and inflicted significant financial harm on the plaintiffs and class members. The plaintiffs alleged a conspiracy to restrain trade in violation of Section 1 of the Sherman Act, breach of contract, unjust enrichment, and breach of fiduciary duty.

This case is No. 1:19-cv-01608-JMF.

Attorneys: Brant Duncan Kuehn (Wollmuth Maher & Deutsch LLP) and Jeremy Daniel Andersen (Quinn, Emanuel, Urquhart, Oliver & Hedges, LLP) for City of Philadelphia. David Sapir Lesser (Wilmer Cutler Pickering Hale & Dorr LLP) for Bank of America Corp., Bank of America, N.A. and Banc of America Securities LLC.

Companies: Bank of America Corp.; Bank of America, N.A.; Banc of America Securities LLC; Wells Fargo & Co.

MainStory: TopStory Antitrust NewYorkNews

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