Tag Archives: World Savings

Whistleblower suit targets accounting, controls in Wachovia’s investment bank

A newly unsealed federal lawsuit alleges Wachovia’s investment bank violated accounting rules and skirted internal controls to pursue short-term profits, benefiting senior management at the expense of the former Charlotte-based bank’s financial health.

Two whistleblowers, including a former Wachovia controller who lives in Union County, filed their lawsuit on behalf of the federal government, alleging the bank defrauded U.S. agencies that loaned money and provided other assistance to the bank in the financial crisis.

The lawsuit was first filed in 2011 but kept under seal until this week. Under the U.S. False Claims Act, the whistleblowers could be eligible to receive up to 30 percent of any damages or penalties awarded under the action.

The suit – filed against Wells Fargo, which bought Wachovia in 2008 – is the latest legal action to take on banks for their role in the global financial meltdown.

The complaint mostly targets alleged fraud that occurred in Wachovia’s Charlotte-based corporate and investment bank, which was a major player in packaging commercial real estate loans into securities. The complaint also alleges that Golden West Financial, the mortgage company Wachovia bought in 2006, had poor internal controls and inadequate underwriting practices.

Like other big banks, Wachovia began reporting billions of dollars in losses in its investment bank in 2007 after a global credit crunch spurred by a meltdown in subprime mortgages made to borrowers with spotty credit. By the fall of 2008, with losses also ballooning in its Golden West portfolio, the stalwart North Carolina institution was on the verge of failure and in need of an emergency sale to San Francisco-based Wells Fargo.

The suit says Wachovia defrauded the government of billions of dollars when it accepted payment from various federal programs while engaging in unsound banking practices, making false certifications about its financial statements and concealing “mismanagement and fraudulent practices.” Later, Wells Fargo did not “come clean” about the fraud it inherited, the suit claims.

The government “should do right by the U.S. taxpayer and recover monies from Wachovia and Wells Fargo under the U.S. False Claims Act for having bailed them out under outrageously false and fraudulent pretenses,” the complaint states.

Wells Fargo in a statement said the bank “continues to believe these claims are without merit.”

And here is the 60 Minutes segment on World Savings  in 2009 called World of Trouble: Three years before the housing market crash, Paul Bishop says he warned his superiors at World Savings that many of the mortgages they were granting were misleading and predatory. 

World Savings Bank Loans Were Securitized – Pooling and Servicing Agreement Uncovered

Posted on March 15, 2011 by Dan Edstrom

Contrary to what Wells Fargo is saying in court, we have proof that World Savings Bank Securitized loans into REMICs.  We had some evidence of this already, but newly added is a Pooling and Servicing Agreement that we have acquired for World Savings Bank REMIC 12.  The terms are fairly standard that you see in most other securitizations, except that World Savings Bank played nearly all parts in the transaction (the originator, sponsor/seller, depositor, underwriter, etc).  The servicers were required and obligated to make principal and interest payments whether or not they receive them from the homeowners, the notes were required to be endorsed without recourse to the order of Trustee and showing an unbroken chain of endorsements [..] from the originator thereof to the Person endorsing it to Trustee.  It is all here, even the second set of books kept by the master servicer (you know, the true accounting that is concealed, misrepresented and not disclosed to any court of law).

This is a HUGE breakthrough for those looking for evidence that their World Savings Bank loans were securitized.

Download the Pooling and Servicing Agreement here