Wells Fargo (WFC) was accused in a lawsuit of mishandling the investments of a collateralized-debt obligations vehicle created by WestLB, a German state-owned bank that was bailed out and dissolved following the 2008 financial crisis.
Erste Abwicklungsanstalt, a German public agency created to take over and wind up WestLB's assets, and House of Europe Funding I, the Cayman Islands-based CDO issuer, filed a complaint yesterday in federal court in Manhattan.
They accuse Wells Fargo, as trustee and collateral administrator, and Collineo Asset Management, as the asset manager, of "rampant mismanagement" and "flagrant disregard" by investing more of the funds raised by House of Europe Funding I in other CDOs than they were allowed.
The alleged mismanagement has caused, or is expected to cause, about $160 million in losses to Europe House Funding I, according to the complaint.
WestLB created House of Europe Funding I in 2003 as a CDO issuer that used the money it raised by selling securities to invest in portfolios of assets, including bonds, loans and other debt obligations, according to the complaint.
Dusseldorf-based WestLB, whose origins dated back to 1832, ceased operations last year.
Ancel Martinez, a spokesman for San Francisco-based Wells Fargo, didn't have an immediate comment yesterday on the lawsuit.