Wachovia Says It May Face SEC Charges

Banking giant Wachovia Corp. on Tuesday said it might face federal charges related to stock transactions before a big merger with a former rival, and separate allegations of improper mutual fund trading.

The stock transactions followed the 2001 announcement that Charlotte, N.C.-based First Union Corp. would buy Wachovia and take its name.

The bank said the Securities and Exchange Commission had laid out its claims in a so-called Wells notice.

The SEC also may take action against Wachovia’s Evergreen Investment Management unit for alleged rapid trading of mutual fund shares and for trading by a former Evergreen money manager in his own fund, the bank said.

Wachovia said it was planning a response to the Wells notice. The bank’s shares fell 34 cents to $44.20 on the New York Stock Exchange.

The former Wachovia was at the center of a takeover battle between First Union and Atlanta-based SunTrust Banks Inc. in 2001. SunTrust failed in its bid for Wachovia, which was bought by First Union for $14.9 billion in September of that year.

Regulators are looking at certain stock transactions before the merger, Wachovia has said. The purchases of First Union stock by both Wachovia and First Union in 2001 were intended to undermine SunTrust’s higher bid by narrowing the gap between the two takeover offers, SunTrust said at the time.

Wachovia Chief Executive Kennedy Thompson last year said the purchases were proper.

In the SEC’s probe of Evergreen, the agency said it was examining an arrangement between a former Evergreen employee and a broker involving so-called market-timing trades that exceeded the limits specified in the written policies of the firm’s funds, Wachovia said.

In addition, Wachovia said the SEC was studying whether a former Evergreen portfolio manager had improperly bought and sold shares from September 2001 to January 2003 in the fund he managed at the time.