the St. Louis headquarters of Wachovia Securities to
conduct an onsite examination of records and question
bank officials about the company’s sales and marketing
practices.
Such examinations aren’t unusual, but “there was a
lot of tension in the room,” Angelakos says. “The dynamics are different when you are there in person.
There’s a sense of ‘we need to get what we came to
get,’ but it’s also good to have a sense of cooperation.”
Angelakos spent the entire day at Wachovia Securities, but the $9 billion case against the subsidiary of
the Charlotte, N.C., bank was just one part of the task
force’s coordinated effort.
“You had to consider the big picture because there
is a competitive element among the firms,” Angelakos
says. “When we settled one case, the other firms would
say, ‘Why did they get that?’ But you had to consider
the unique circumstances of each firm.”
On Aug. 13, Morgan Stanley agreed to repurchase
about $4.5 billion of the securities and pay a $35 million penalty. Angelakos and Nix drafted the agreement
via e-mail and conference calls.
Although the conduct was the same, Angelakos says,
“Goldman was a different animal,” with an average
individual investor account of more than $20 million.
Angelakos was given a green light to fly to New York
City late on Aug. 20, arriving at her hotel around 1: 30
in the morning.
After a 6 a.m. working breakfast at the hotel, set-
tlement negotiations with the investment bank began
at the New York attorney general’s office. Angelakos,
Nix and about seven other state regulators and bank
officials spent the next 12 hours holed up in conference rooms hammering out the agreement for Goldman
Sachs to repurchase $1.5 billion of the securities and
pay a $22.5 million fine.
“We wanted to get it done, but we wanted to do it
right,” Angelakos says. “There were moments where
you said, ‘We are at an impasse,’ but then dialogue
opened again. The firms have a lot to lose by not
working it out.”
Customers were expecting the banking giants and
regulators to reach a solution giving them access to
their funds. Ultimately, Angelakos says, the state regulators wanted to send a common message to investors:
You can have faith in the regulation of these markets.
—Rachel M. Zahorsky
