I believe Wachovia, Wells Fargo, KPMG, the Securities and Exchange Commission (SEC), The Financial Industry Regulatory Authority (FINRA) and the Federal Reserve illegally misled Wachovia’s shareholders. I believe I disseminated inaccurate advice to clients governed by the Investment Advisors Act of 1940, based on information audited by KPMG and withheld by Wachovia and Wells Fargo’s executive management. I believe my clients and Wachovia shareholders lost as insiders profited from material undisclosed information.
This journey began by providing an external email address and phone number to Wells Fargo's confidential ethics hot line, after which I was contacted on multiple occasions by investigators on my company email and phone.
Realizing my anonymity was compromised and my family’s safety at risk after the first internal ‘investigation’ was ‘closed’ in the first week of January, 2012, I took the issues to my local manager, after which Wells Fargo's executive management enlisted an outside ‘independent’ investigator who promptly found no merit to my assertions. Thinking I could mitigate personal risk by contacting regulatory authorities, I filed with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) DC Office of the Whistleblower which went nowhere. I then filed with the NC Secretary of State Securities Division, who investigated and referred files to Atlanta's SEC and FINRA offices.
And then nothing. American regulatory authorities will not say whether a case exists or if a case is opened or closed, even though I contacted the government during and after interactions with Wells Fargo management, leaving myself and loved ones at risk of reprisal.
According to Bloomberg News, on March 27, 2008, Wachovia borrowed $3.5 billion from the Federal Reserve’s Term Auction Facility (TAF) which was not disclosed to the firm’s shareholders and not reported in the company’s required securities filings.
On March 28, 2008, Wachovia’s stock lost about 4%. I believe if Wachovia had announced the loan details at the time as required by law, the stock price would most likely have gone up instead.
Not reporting Federal Reserve material borrowings, credit lines, terms and interest rates is a violation of Sarbanes/Oxley laws, and not informing employees who managed advisory accounts was a violation of fiduciary duties as described in the Investment Advisors Act of 1940.
Bloomberg compiled and reported “21,000 transactions” from 2008 and 2009, after reviewing “29,346 pages of documents obtained under the Freedom of Information Act” from the Federal Reserve, on August 22, 2011, including undisclosed loans to Wachovia and Wells Fargo amongst others which appears to include BB&T and Ally Financial, formerly GMAC.
KPMG was/is the auditor for both Wachovia and Wells Fargo.
Some banks which received Term Auction Facility (TAF) loans disclosed details in their securities filings per Sarbanes/Oxley laws, like Union Bank & Trust and Peoples Bank of North Carolina. Wachovia’s, and later Wells Fargo’s securities filings did not account for the TAF loans, total credit lines, interest rates, collateral pledged or amounts of loans outstanding as other banks did as required by Sarbanes/Oxley and SEC rules.
Multiples of other firms look like they also didn’t disclose total credit lines, interest rates, collateral pledged and amounts outstanding from the Federal Reserve.
It appears that Wachovia CEO Robert Steel bought Wachovia’s stock in a breach of trust, confidence and his fiduciary duty to my clients and shareholders while in possession of material, nonpublic information about Wachovia. Mr. Steel most likely knew about other firm’s borrowings via his time spent at the U.S. Treasury Department.
On July 9, 2008, Robert Steel became president and CEO of Wachovia Corporation after working for Goldman Sachs from 1976 to 2004 and the US Treasury under former Goldman Sachs CEO Henry Paulson from October 10, 2006 until July 9, 2008. Mr. Steel was “the principal adviser to the secretary on matters of domestic finance and led the department's activities regarding the U.S. financial system, fiscal policy and operations, governmental assets and liabilities, and related economic matters,” according to Wikipedia’s biography.
On July 22, 2008, Mr. Steel personally purchased 1,000,000 shares of Wachovia’s stock as the company’s TAF borrowing reached $12.5 billion, which appears not to have been disclosed in securities filings audited by KPMG. As the statute of limitations runs out after five years, Mr. Steel's five years are up on July 22, 2013, after which he cannot be charged with insider trading of his 2008 purchase. I believe Wells Fargo's attorney's are trying to run out the clock, so thier clients face no accountability.
In an interview with CNBC's Jim Cramer On Monday, September 15, 2008, Robert Steel said "I think it's really about...transparency. People have to understand the assets and really be able to say, this is what I own... Complete disclosure. ...we can work through this with transparency, liquidity and capital. ...Our strategy was to give you all the data so you could make your own model. We tell you what we're doing... ...we're raising capital ourselves by basically shrinking the balance sheet, cutting the dividend, cutting expenses. We can create more capital ourselves that way... for now, we feel like we can work through this..." After Jim Cramer asked "Should there be any sort of quick regulatory relief from the SEC that would make life easier to be able to make your bank much stronger?", Mr. Steel responded "I don't think it's about my bank."
After not reporting TAF loans, Wachovia's CEO wrote "I, Robert K. Steel, certify that: I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 of Wachovia Corporation; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report" on October 30, 2008.
The Wall Street Journal reported the SEC investigated claims Steel made about the future of the bank before it started talks about a potential merger.
Wachovia stock price on date of first TAF loan: 3/27/2008 - Last Trade: 27.07
Wachovia price on date of completed merger with Wells: 12/31/2008 - Last Trade: 5.54
As of January 31, 2008, there were 1,981,983,990 Wachovia shares outstanding.
27.07 - 5.54 = 21.53 x 1,981,983,990 = $42,672,115,304.70 Wachovia market capitalization lost between the first undisclosed TAF loan and Wells merger.
I believe Wachovia’s shareholders were misled by Wachovia and Wells Fargo’s management, KPMG, and at least the Federal Reserve and the U.S. Treasury Department. Under Sarbanes-Oxley, public companies must promptly disclose information about material changes in financial conditions or operations. Financial information in press releases or other public disclosures must not “contain an untrue statement” or omit the statement of a material fact necessary to make the statement not misleading. The company’s accountants are required to attest to and report on the assessments made by company’s management.
On October 14, 2008, Treasury Secretary Henry Paulson announced the government would overtly "invest" in the nine largest American banks, after the Federal Reserve had already “covertly” loaned money to many of the same firms including Wells Fargo through other means.
Mr. Steel was at least aware of Wachovia’s Federal Reserve loans since July, 2012, if not the undisclosed loans to multiples of other financial institutions.
If Mr. Steel was “the principal adviser…on matters of domestic finance and led the department's activities regarding the U.S. financial system, fiscal policy and operations”, how could he not have known and acted on undisclosed material information?
I believe Sarbanes/Oxley has been violated. I believe my client's best interests have been violated. I believe I provided my fiduciary clients inaccurate information provided by Wells Fargo’s executive management and audited by KPMG. I believe no one has been held accountable. I believe my clients and Wachovia shareholders lost money as a select few profited from material insider information illegally provided, enabled and consented to by US taxpayer funded government political appointees and employees.
I believe if the TAF loans had been reported as required by Sarbanes-Oxley, a great deal of North Carolinian wealth and jobs would not have been lost.
After not reporting TAF loans, Bloomberg reported Wells Fargo Chairman Richard Kovacevich saying that even though Wells Fargo didn’t want the money, it had to comply with the same rules that the government put on banks that did need it, on March 16, 2009. “If we were not forced to take the TARP money, we would have been able to raise private capital at that time” said Mr. Kovacevich, who maintained that Wells Fargo didn’t need to cut the dividend to preserve cash. The Boston Globe reported “Wells Fargo chairman Richard Kovacevich initially said he did not want TARP money and later called government stress-tests tied to the program "asinine."
After most of Wachovia’s shareholders were locked into losses on completion of the merger, Mr. Steel and Kovacevich ended up far better off, knowing what most didn’t.
On June 22, 2010, Robert Steel was appointed Deputy Mayor for Economic Development by New York City Mayor Michael Bloomberg, after which, Steel resigned his seat on the Wells Fargo board. According to Morningstar data, Mr. Steel owned 601,903 shares of Wells Fargo in 2010, which would be worth $20,446,644.91 as of October 26, 2012.
On Nov 28, 2011, Bloomberg published “Secret Fed Loans Gave Banks Undisclosed $13B,” which stated “The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. ...The Fed didn't tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn't mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy.”
Bloomberg estimated the profits from the undisclosed Federal Reserve Loans was $878.2 million for Wells Fargo, and $149.4 million for Wachovia, as my clients accounts went sideways to down after both companies failed to disclose material information on their financial conditions.
Bloomberg News, nor any other for profit news organization that I am aware of, has reported on the legal violations since December, 2011.
After reviewing the Bloomberg article, I chose to file an complaint through Wells Fargo’s internal ethics line in early December, 2011.
On January 4, 2012, an email in response to my ethics line complaint from a Senior Investigative Agent and Vice President from Wells Fargo Corporate Investigations said “Please confer with your manager if you feel the need, but our case is closed.”
I believe Wachovia and Wells Fargo received TARP money but did not disclose secret loans from the Federal Reserve, violating disclosure laws of Sarbanes-Oxley.
I believe Wachovia and Wells Fargo’s executive management misled taxpayers, shareholders and Congress concerning material information. In doing so, executives violated fiduciary duties to the firms financial advisors and their clients while gaming executive compensation at the expense of Wachovia shareholders, whose stock probably wouldn’t have dropped as much if the loans had been disclosed under law.
Timothy J. Fitzmaurice, J.D. Candidate, 2013, Fordham University School of Law; B.A. 2010, Boston College wrote; "Section 806 of the Sarbanes-Oxley Act of 2002 (SOX) created a new federal anti-retaliation protection for corporate whistleblowers. Initially, the Department of Labor Administrative Review Board (ARB) and federal courts limited the scope of section 806 by holding that a whistleblower must report conduct that “definitively and specifically” relates to a violation of one of the rules, regulations, or laws listed in section 806 to engage in protected activity. Recently, however, the ARB abandoned this approach, and held that a whistleblower engages in protected activity under section 806 when she reports information that she “reasonably believes” relates to a violation of one of the rules, regulations, or laws listed in section 806... the “definitively and specifically” standard is inconsistent with the text of section 806. Second, the legislative history supports the “reasonably believes” standard. Third, the “reasonably believes” standard is more consistent with the reasonable person standard that Congress intended. Fourth, the Dodd-Frank Act did not constitute congressional endorsement of, or acquiescence to, the “definitively and specifically” standard. Finally, the “reasonably believes” standard effectuates important public policy goals because it will help reverse the lack of success whistleblowers have had litigating section 806 claims, and it will harmonize the protected activity standards under SOX and the Dodd-Frank Act... Unfortunately for the definitively and specifically standard, the text of section 806 clearly supports the reasonably believes standard for two reasons. First, the text of section 806 includes the phrase “reasonably believes,” while “definitively and specifically” does not appear in the text... Second, the definitively and specifically standard would add limiting language to the statutory text of section 806, which the Supreme Court has refused to do in two recent decisions... To engage in protected activity under the reasonably believes standard, whistleblowers still must report conduct that relates to a violation of one of the rules, regulations, or laws listed in section 806... The Oxford English Dictionary defines “reasonably” as “with good reason, justly, properly” and “suitably, sufficiently, fairly.” It defines “believe” as “to believe in a thing, e.g. the truth of a statement.” Putting these definitions together, the ordinary meaning of “reasonably believes” is a just, proper, or fair belief that something is true. Thus, section 806’s text demands that whistleblowers have a just, proper, and fair belief that some conduct violates one of the rules, regulations, or laws listed in section 806... the ordinary meaning of the phrase “reasonably believes” has to do with what the whistleblower thought about the conduct, while thedefinitively and specifically standard relates to the type of conduct the whistleblower reported. Accordingly, the ordinary meaning of the phrase “reasonably believes” also does not support reading the definitively and specifically standard into the text of section 806."
http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=4786&context=flr
The text of section 806 provides, in part, that: "No company . . . may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee . . . because of any lawful act done by the employee—(1) to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of [18 U.S.C. § 1341(mail fraud), 18 U.S.C. § 1343 (wire, radio, or TV fraud), 18 U.S.C. § 1344 (bank fraud), or 18 U.S.C. § 1348 (securities fraud)], any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders . . ."
SEC Interpretation: "Management's Discussion and Analysis of Financial Condition and Results of Operations; Certain Investment Company Disclosures" states "Many financial institutions, such as thrifts and banks, are receiving financial assistance in connection with federally assisted acquisitions or restructurings...If these or any other types of federal financial assistance have materially affected, or are reasonably likely to have a material future effect upon, financial condition or results of operations, the MD&A should provide disclosure of the nature, amounts, and effects of such assistance..."
http://www.sec.gov/rules/interp/33-6835.htm
I am a Wells Fargo shareholder, and some of clients were as well.
As a Wells Fargo shareholder, the accounts I managed at Wells Fargo Advisors were governed by the Investment Advisers Act of 1940. Multiples of Federal and state laws require investment brokers be held to fiduciary standards for advisory accounts, requiring advisors to act solely in the best interest of their clients. Advisors must disclose any conflict, or potential conflict, to their clients prior to and during a business engagement. A Wells Fargo Advisors client approved flier states “Fiduciary duty represents the highest degree of trust and confidence that the investment advisor will act in your best interest. Investment Advisors are governed by the Investment Advisers Act of 1940 and applicable state securities laws, which govern conduct and disclosure requirements, creating a high legal standard referred to as “fiduciary” duty. As a fiduciary, your investment advisor has the duty to: Make full and fair disclosure of all material facts, particularly where the advisor’s interests may conflict with the client’s. Have a reasonable, independent basis for their investment advice. Be loyal to clients. An advisor will be measured against a higher standard of conduct than a broker. In such agreements, the firm and your Financial Advisor explicitly acknowledge an advisory relationship and obligations to you.”
I believe my whistleblowing was a protected activity, and a captured regulatory infrastructure ignored violations to not cause harm to Too Big To Fail Banks, as the US Attorney General and others have publicly admitted under oath.
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