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Wells Fargo securities lending program on trial

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A trial over Wells Fargo's securities lending practices began Tuesday in St. Paul, with lawyers for both sides painting different pictures of the San Francisco-based bank's management of a lending program.

The Star Tribune reports that a group of 11 jurors will decide whether Wells Fargo & Co. grossly mismanaged a former securities lending program and lied about its safety, or whether the financial calamity that followed the boom was to blame for millions of dollars in losses.

The case is before U.S. District Judge Donovan Frank. Wells Fargo marketed the program to institutional investors such as pension funds.

The investors accuse Wells Fargo of fraud in playing with what was supposed to be a very conservative investment program. They assert that the bank failed to properly monitor and manage the collateral investments, then lied to participants about the performance while investments melted down.

Of the total securities in the portfolio in the fall of 2007, nearly 15 percent were distressed or had defaulted.

Minneapolis lawyer Mike Ciresi is arguing for the investors. Wells Fargo has denied the allegations.

The Strib reports that Wells Fargo lost an identical case in 2010 after a six-week jury trial in Ramsey County District Court. In that case, also brought by Ciresi, jurors determined the bank breached its fiduciary duty and engaged in fraud. They awarded nearly $30 million in damages to four charitable foundations, with an additional award of damages and attorneys’ fees and interest bringing the total to about $57 million.

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