St. Petersburg, Wells Fargo feud in court

March 31, 2012 at 1:09 PM
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TAMPA, Fla., March 31 (UPI) -- A former St. Petersburg, Fla., mayor said in court he was hard-pressed to recall a deal he signed allowing Wachovia Bank to take larger risks with city funds.

Rick Baker, a former corporate attorney who was mayor of St. Petersburg from 2001 to 2010, said he delegated many of the city's financial decisions to staff members or simply allowed financial managers at Wachovia Global Securities to oversee the city's $400 million investment portfolio, the Tampa Bay Times of St. Petersburg reported Saturday.

The city is suing Wells Fargo & Co., which bought Wachovia in the wake of the national financial crisis. At issue is how much in advance city officials were aware that investment firm Lehman Brothers was about to collapse.

The city contends Wachovia did not warn them Lehman Brothers was going bankrupt. Attorneys representing Wells Fargo are arguing the city was well informed and failed to make a timely decision on their investments to avoid losses.

The city is seeking $11 million it lost when Lehman Brothers folded in September 2008.

Baker said as troubles at Lehman Brothers became more evident in the summer of 2008, he asked City Administrator Tish Elston to look into the issue.

He then said he did not recall any follow-up discussion on the issue.

Elston, in turn, said she did not review the agreement between the city and Wachovia, and that it was Wachovia's responsibility to keep the city's finances safe.

U.S. Magistrate Judge Thomas McCoun allowed Wells Fargo attorneys to show a video from June 2008 in which City Council Member Wengay Newton asked if the city's finances were safe.

Economic Development Director Dave Goodwin, on the video, says the city would look into that issue.

"It shows [the city] knew these issues. They should have been on heightened alert themselves," said Wells Fargo attorney Mary Hackett.

The trial is expected to continue until the middle of next week, the newspaper said.

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