State sues Wells Fargo

The SF-based banking giant is accused of misleading investors by selling them $1.5 billion worth of auction-rate securities that it claimed were as safe as cash. But the market collapsed last year, leaving the investors either unable to sell the securities or having to take a loss. From the AG's press release:

A Southern California woman suffering from lung cancer and needing extra funds to help treat her illness sold her home and put the money into a Wells Fargo savings account. A Wells Fargo agent later recommended she put the money into an account with a higher interest rate. When the woman told the agent she needed to access the money and could not afford to lose any of it, she was reassured that her money would be safe like cash. Without disclosing the nature of the investment, the agent invested the funds in auction-rate securities and when the auctions failed, the woman could not access her money.

Wells says it had taken steps to help customers hit by the collapse of the market, including offering loans to tide them over. "Wells Fargo could not have predicted these extraordinary circumstances, and even with the benefit of hindsight is not responsible for them," said Charles Daggs, CEO of Wells Fargo Investments. Here's an LAT story and here's the lawsuit.