Originally created 11/05/04

Wachovia to settle SEC charges



WASHINGTON - Wachovia Corp. agreed to pay a $37 million civil fine Thursday to settle federal regulators' allegations that the banking giant violated disclosure rules in connection with its 2001 merger with First Union Corp.

The Securities and Exchange Commission alleged in a lawsuit that Wachovia and First Union failed to disclose in quarterly financial reports and in a joint proxy statement related to the merger that Wachovia intended to, and did in fact, buy $500 million of First Union stock during the period when First Union and SunTrust Banks had launched competing, all stock bids for Wachovia. As a result, Wachovia shareholders were unable to evaluate the effect of the company's purchases of First Union shares before voting on the competing bids, the SEC said.

The agency said that Wachovia provided incomplete documents and was slow to produce them during its investigation, a factor taken into account in setting the fine at $37 million.

"The substantial penalty here reflects not only the seriousness of the disclosure violations but also the company's failure to meet its legal obligations in the course of an SEC investigation," SEC Enforcement Director Stephen Cutler said in a statement.

Wachovia, based in Charlotte, N.C., neither admitted nor denied wrongdoing in the settlement but did agree to refrain from future violations of the securities laws.

Wachovia merged with First Union in late 2001 in a $14.6 billion deal creating the nation's fourth-largest banking company with operations from Florida to Connecticut. The merger ended a bitter takeover battle in which SunTrust had challenged First Union's bid with a $15.1 billion unsolicited offer for Wachovia. The combined bank took the Wachovia name.

Wachovia disclosed in August that the SEC was poised to take action against the company and several executives in connection with the First Union merger. Wachovia also said that SEC staff was considering a civil action against a subsidiary, Evergreen Investment Management, for alleged improper trading of mutual funds.

This month, Wachovia completed a $14.3 billion acquisition of SouthTrust Corp. to create the largest bank in the Southeast and give Wachovia an opening in the lucrative Texas market.

Shares of Wachovia rose 62 cents to $50.97 in afternoon trading on the New York Stock Exchange.

On the Net:

Securities and Exchange Commission: http://www.sec.gov

Wachovia Corp.: http://www.wachovia.com

First Union Corp.: http://www.firstunion.com

SouthTrust Corp.: http://www.southtrust.com