Nearly three years later, Wells Fargo is still feeling the stomach ache from its decision to gobble up the expired scraps of Wachovia. It was revealed today that the Fargo folks have agreed to shell out $590 million to settle the class-action lawsuit over Wachovia’s “Pick-a-Pay” loans.
The suit alleged that investors who purchased preferred securities and debt tied to these loans were were told that the portfolio was of “pristine credit quality,” which it most certainly wasn’t.
In reality, about $51 billion of the “Pick-A-[P]ay” portfolio was made up of loans to subprime borrowers, the plaintiffs contended. They also said Wachovia routinely made loans to borrowers without verifying their income or job titles.
As usual in these huge settlements, the one who pays out the big bucks gets to say that writing a check for $590 million does not “constitute an admission of Wells Fargo liability or any violation of law by Wachovia.”
Fellow defendant in the suit, auditing company KPMG, agreed to throw in $37 million of its own cash, raising the total to be paid out to $627 million.