Thursday, December 14, 2017
News Roundup

City of St. Petersburg wins $10.4 million verdict against big bank

TAMPA — In a major victory for St. Petersburg that further feeds into a backlash against Wall Street, a federal jury ruled Tuesday that Wachovia Global Securities breached its contract and owes the city $10.4 million for not notifying it sooner about a failing investment.

Seven jurors spent more than four hours deliberating in a case that pitted city officials against financial giant Wells Fargo, which bought Wachovia in 2009. After six days of testimony, jurors sided with city officials who blamed Wachovia for losses they incurred when Lehman Brothers went bankrupt.

"The bank was the professional," said juror Michael Gross, 62, of Pinellas Park. "The city might have been negligent, but the city hired the bank to manage those investments. That's what they were paid to do."

Two jurors interviewed by the Tampa Bay Times said both legal teams presented strong arguments in a case that is bound to have ramifications nationwide. About a dozen lawsuits are set for trial in which large investors, including Sarasota County, are seeking to recover losses in Lehman Brothers bonds from the financial adviser who managed the portfolios — Wachovia Global Securities.

While the jurors agreed with Wells Fargo attorneys that the city should have done a better job overseeing an investment portfolio of more than $400 million, they sided with city attorneys in concluding that such negligence was moot because the investments ultimately were Wachovia's responsibility.

"We weren't happy with how the city managed its portfolio," said jury foreman Bill Jotham, 61, of Sarasota. "But the evidence showed that Wachovia didn't do its fiduciary duty."

City officials expect motions related to the trial to be filed in the coming days, and offered few words for comment.

"We're pleased with the verdict, the verdict speaks for itself," said City Attorney John Wolfe.

The verdict was undeniably good news for a city that had spent $1.2 million to fight a case that was far from a sure bet.

"Nothing is ever certain in litigation, but we were always confident in our legal team," Mayor Bill Foster said. Handling much of the litigation for the city were Rob Marcus and C. Bailey King from the Charlotte, N.C., law firm Smith Moore Leatherwood. Helping them throughout was assistant city attorney Jacqueline Kovilaritch.

If the city recoups its money from Wells Fargo, Foster said it will be put back into the city's investment portfolio.

Shortly after the verdict, Laura Fay, a Wells Fargo spokeswoman, issued a statement.

"We appreciate the jury's time and attention on this case," Fay said. "However, we are very disappointed with the verdict that was announced today and will consider our legal options, including an appeal. We believe the investments made by Wachovia on behalf of its clients in the securities lending program were in accordance with investment guidelines.

"The company was focused at all times on serving our clients' interests and we worked very hard and responsibly to achieve the best results for all of the participants … during very difficult economic conditions."

The city sued Wells Fargo in 2010 in an attempt to recoup the money it lost when Lehman Brothers went bankrupt. At the time, the losses were about $15 million. But Lehman Brothers has emerged from bankruptcy, and the bonds the city has are now worth about $4 million. The difference is what the city wanted Wells Fargo to pay.

The city says Wachovia failed to alert it to three credit downgrades in the summer of 2008, a sign of corporate trouble. While they couldn't show documented evidence that the city was warned about the three downgrades, Wells Fargo attorneys argued that the city had plenty of information about Lehman's issues and should have known better.

St. Petersburg's trial drew attorneys from the other cases to watch and observe.

They saw testimony from former Mayor Rick Baker and other St. Petersburg officials. They heard from financial guru Glenn Hubbard, the dean of the Graduate School of Business of Columbia University whose testimony cost Wells Fargo $1,200 an hour.

Wells Fargo attorneys argued the city did a poor job of managing its investments and said it was negligence on the behalf of the city's former finance director, Jeff Spies, that was really to blame.

It almost worked. Gross and Jotham said the jurors didn't think highly of Spies, but they couldn't blame him for the loss because they felt Wachovia was the one who needed to communicate better with its client, St. Petersburg.

"We didn't think Jeff Spies was a credible witness," Jotham said. "But we didn't want to penalize the city for what one man did."

"(Spies) was relying a lot on the bank to give guidance," Gross said. "We don't think the bank was malicious, but they were supposed to be in better contact with the city, and they weren't."

Gross and Jotham said jurors reached consensus quickly and there was little disagreement.

The jurors broke for deliberations at 10:30 a.m. U.S. Magistrate Judge Thomas McCoun instructed them to consider the city's three claims against Wachovia: breach of contract, breach of fiduciary duty and negligence. If jurors found that the city was partly to blame for the losses through its own breach of contract or negligence, McCoun told them to lower the amount the city would get back.

The jurors came back about 3:30 p.m. but were confused about the instructions. They reconvened briefly before coming out with a verdict that had two damage amounts that were different, when they should have been the same. McCoun asked them to reconvene and try again.

Wells Fargo attorney Mary Hackett objected the second time the jury reconvened, stating that the deliberation process seemed biased with finding fault with Wells Fargo. McCoun overruled the objection. By that time, city attorneys were smiling.

Minutes later, jurors returned and awarded the entire amount the city claimed: $10,387,500.

"It came down to who knew what and when," Gross said.

Times researcher John Martin contributed to this report. Michael Van Sickler can be reached at (727) 893-8037 or [email protected]

Comments

Lottery resultsNumbers drawn after 9 p.m. are no longer available by our deadlines. For results, please go to tampabay.com/lottery.Pick 2, 3, 4, 5Wed., Dec. 13, midday:53 738 7036e_SRit10321Wed., Dec. 13, evening:57 775 2681e_SRit55890LottoWed., Dec....
Updated: 3 hours ago

Winter meetings journal: Rays trade for money to sign top international free agent

LAKE BUENA VISTA — While most of the business conducted at the meetings impacts the big-league team one way or another, the Rays are working to finalize a move they hope pays off big sometime in the 2020s.In trading Wednesday to acquire $1 million in...
Updated: 3 hours ago
Market starting to set itself as Rays’ trade talks intensify

Market starting to set itself as Rays’ trade talks intensify

LAKE BUENA VISTA — Alex Colome claimed he was just showing good social media manners Tuesday night in following four Cardinals-related Instagram accounts since they were saying nice things about him.In doing so, whether for that reason or another mor...
Updated: 3 hours ago
Senate race motivated Alabama’s white, black evangelical voters in different ways

Senate race motivated Alabama’s white, black evangelical voters in different ways

Nationally, the word "evangelical" has become in recent years nearly synonymous with "conservative Republican" and Alabama is one of the most evangelical states in the country. But in Alabama, there is a difference: black Christians.While in many par...
Updated: 3 hours ago
Gators crash volleyball power party, play national semifinal Thursday

Gators crash volleyball power party, play national semifinal Thursday

KANSAS CITY, Mo. — It’s difficult to call a volleyball program that has been to the Final Four eight times an underdog, especially the way Florida rallied to beat Southern California and punch its latest ticket. Yet of the four schools descending on ...
Updated: 4 hours ago

High school scoreboard for Dec. 13

Wednesday’s scoreboardGirls soccerCountryside 3, St. Petersburg 1Girls basketballPalm Harbor U. 42, Largo 25
Updated: 4 hours ago
Minnesota Lt. Gov. Tina Smith named to fill Franken seat

Minnesota Lt. Gov. Tina Smith named to fill Franken seat

ST. PAUL, Minn. — Minnesota Gov. Mark Dayton appointed Lt. Gov. Tina Smith on Wednesday to fill fellow Democrat Al Franken’s Senate seat until a special election in November, setting up his longtime and trusted adviser for a potentially bruising 2018...
Updated: 4 hours ago
Florida Toys for Tots charity raffles off AR-15 rifle. Gun debate ensues.

Florida Toys for Tots charity raffles off AR-15 rifle. Gun debate ensues.

SPRING HILL — Hernando County Commission Vice Chairman Steve Champion wanted to do something to help raise money for the annual Toys for Tots drive. So he donated the grand prize for the Nov. 18 raffle:It was an AR-15 semiautomatic rifle.That led to ...
Updated: 4 hours ago
Thefts from cell towers interrupted service, deputies say

Thefts from cell towers interrupted service, deputies say

Lost cell signal recently? The culprit could be a 40-year-old Ruskin man who deputies said stole thousands of dollars worth of the equipment that powers cell towers. The theft interrupted cell tower signals on at least two occasions, deputies said, i...
Updated: 5 hours ago
Foot washes ashore in Canada, again; Abbas wants U.S. out as Mideast mediator; 12 sentenced to life for gang-raping kids; more in world news

Foot washes ashore in Canada, again; Abbas wants U.S. out as Mideast mediator; 12 sentenced to life for gang-raping kids; more in world news

CanadaJust another foot washing ashoreAnother human foot has been found on British Columbia’s coastline, the 13th such grim discovery since 2007. Police said a man was walking on the beach in Jordan River on Vancouver Island when his dog found the fo...
Updated: 5 hours ago