Trying to slip through the cracks at Wachovia…
Of all the news that came out about Wachovia (WB) yesterday — the unexpected loss, the $7 billion in new capital, and the dramatic cut in the dividend — there were several new disclosures, primarily related to legal troubles — in the 8-K they filed yesterday that went largely unnoticed. We’ll take them in order:
- Wachovia updated the status of its formal investigation with the Controller of the Currency related to a company called Payment Processing Center, a former Wachovia customer (the initial complaint is here), noting for the first time in yesterday’s filing that the resolution will involve restitution, but giving no estimate on how much that was likely to be. There’s some more background on this whole mess here.
- Three new lawsuits have been filed against Wachovia by three separate county governments — Fairfax County in Virginia, Hinds County in Mississippi, and Haywood County in Tenn. in March. The lawsuits allege price-fixing in the municipal derivatives market and guaranteed investment contracts market. Bond Buyer has a more detailed description of the lawsuits here.
While it’s hard to say what kind of impact all of this is likely to have over time at Wachovia, it should be pretty clear that having attorneys and regulators circle around a company — particularly one that’s already facing several challenges — is never a good thing. As for the timing, it makes perfect sense. Even though the Haywood County lawsuit — the last of the three — was filed on March 24, Wachovia chose to wait until yesterday to disclose it. After all, dumping a bunch of stuff on investors at the same time practically guarantees that some of it will slip through the cracks.