Bloomberg News

Wells Fargo Sued by Loreley Financing Over $163 Million CDOs

November 02, 2011

(Updates with share price in fifth paragraph.)

Nov. 2 (Bloomberg) -- A Wells Fargo & Co. unit was accused by Loreley Financing in a lawsuit of allegedly conspiring to defraud it in the sales of $163.3 million of collateralized debt obligations.

Wells Fargo Securities LLC created the CDOs, made material misrepresentations and was unjustly enriched by the investments Loreley purchased, Loreley said in a summons filed yesterday in New York State Supreme Court in Manhattan. The document didn’t contain specifics about the allegations. Loreley wants its money back and unspecified punitive damages.

Loreley is a group of special-purpose entities based in Jersey, the largest of the Channel Islands, a dependency of the U.K. with its own legislative assembly and known as a tax haven. The entities were formed for long-term investing in CDOs, pools of assets such as mortgage bonds packaged into new securities, Loreley said in an Oct. 5 lawsuit it filed against Deutsche Bank AG over $440 million in CDO purchases.

Elise Wilkinson, a spokeswoman for San Francisco-based Wells Fargo, didn’t immediately return a voice-mail yesterday seeking comment on the lawsuit.

Wells Fargo fell $1.14, or 4.4 percent, to $24.77 yesterday in New York Stock Exchange composite trading. The shares have declined 20 percent this year.

The case is Loreley Financing v. Wells Fargo Securities, 653037/2011, New York State Supreme Court (Manhattan).

--Editors: Stephen Farr, Peter Blumberg

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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