St Pete sues Wachovia as Bankruptcy spreads

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The city of St. Petersburg has taken up a lawsuit against its financial advisor, Wachovia Bank. The suit was filed in US District Court in Tampa, Florida and stems from Wachovia’s failure to warn the city of the impending collapse of Lehman Brothers Holdings Inc. At the time of the collapse, St. Petersburg was holding $15 million worth of Lehman bonds. Needless to say, after Lehman filed what turned out to be the largest bankruptcy filing in US history, the bonds were practically worthless. The city contends that Wachovia bank should have sounded the alarm bells to it when credit rating agencies drastically downgraded Lehman’s ratings during the spring and summer of 2008. Having lost $15 million, the city attributes it to Wachovia’s inaction over Lehman’s impending collapse.

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