Wells Fargo today agreed to a $1.4 billion settlement with state officials over a securities sale that was branded "false and deceptive" by Attorney General Jerry Brown.
Under the settlement, the big San Francisco bank will repurchase $1.4 billion in so-called auction-rate securities from thousands of customers. About half the money, or $700 million, will go to Californians.
According to Brown, Wells had marketed the securities as safe and highly liquid. When the market froze in early 2008, customers were unable to cash them in, he said. Brown sued Wells in April.
"Wells Fargo convinced thousands of investors to purchase auction-rate securities with promises of robust returns and liquidity, but when the market collapsed, investors were left out in the cold," he said in a press release today. "Based on misleading advice, investors bought these risky securities. Now, retail investors and small businesses are finally getting their money back."
There was some disagreement about the size of the settlement. The North American Securities Administrators Association said Wells Fargo is returning about $1.3 billion to investors.
The association said Wells made settlements six states besides California: Georgia, Missouri, Oregon, Texas, Utah and Washington state. It said the settlements stemmed from an investigation led by Washington state's Department of Financial Institutions.
Wells isn't the first institution to refund money over the collapse of the auction-rate securities market. UBS, Citigroup and others have entered into settlements; the securities administrators association pegged the total settlements at more than $61 billion.
Wells didn't admit any wrongdoing in the settlement.
A spokesman for the bank couldn't be immediately reached for comment.
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