The Madison County Record May 18, 2016, 7:25am


One of Madison County’s oldest class action ended on May 9, when Wells Fargo Bank settled a 15 year old negligence claim over rotten bond issues. 

Wells Fargo and class representative William Tennison of Arkansas canceled a trial that Circuit Judge Barbara Crowder would have started on May 16. 

Crowder
Crowder

Wells Fargo stood as the last of many defendants, and Tennison stood as the last of many plaintiffs. 

Tennison sought $34 million plus interest on behalf of all who bought bonds for nursing homes that a developer in Chicago sponsored. 

Tennison claimed he invested $365,000, and lost all of it. 

Three cities in Wisconsin issued bonds in 1996 and 1997, and three cities in Michigan issued bonds in 1998. 

The Wisconsin Health and Educational Facilities Authority hired Norwest Bank, a predecessor to Wells Fargo, as indenture trustee. 

The Michigan cities hired Norwest through economic development corporations. 

The developer, Malachi Corporation, defaulted on all the bonds in 1998. 

Bond buyers filed suit in Madison County in 2001, against the underwriter, banks, accountants, lawyers, Malachi Corporation directors, and others. 

William Lucco of Edwardsville represented the plaintiffs, in association with the high profile firm of Motley Rice in Mount Pleasant, S.C. 

They alleged a Ponzi scheme in which Malachi Corporation met payments on each bond with proceeds of bond issues that followed.   

No plaintiff alleged any connection to Madison County, but that held true for many of the class actions flooding the court. 

For years, discovery dragged on and some defendants settled.   

In 2010, former circuit judge Daniel Stack certified a class across 38 states alleging negligence and recklessness. 

He rejected claims of fraud, conspiracy, and securities violations. 

Last year Tennison settled claims of the class for $300,000 from Fifth Third Bank, $150,000 from the Indianapolis accounting firm of Blue and Company, and $75,000 from the St. Louis law firm of Gilmore and Bell. 

That left Wells Fargo as sole defendant. 

Wells Fargo asked Crowder to certify questions about Stack’s class certification to Fifth District appellate judges, but she declined last June. 

“While it is an attractive offer to try to fend this complex dispute off to the appellate court, an order will not make this dispute less complex,” Crowder wrote. 

She will hold a hearing on plaintiffs' motion for class settlement at 1:30 p.m. on June 26.

Organizations in this Story

Wells Fargo
402 Montgomery Street
San Francisco, CA 94104

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