Cedar Rapids, Iowa News, Sports, and Weather
City of Cedar Rapids to Get Back Most of Bad Investment
By Rick Smith, Reporter
CEDAR RAPIDS, Iowa - City Hall is getting most of its money back on what proved a lousy, near $2 million investment in 2007.
The good news from City Hall comes in the form of a legal settlement with Wells Fargo Brokerage Services LLC.
Back in 2007, the city invested $1.948 million in a short-term investment called "commercial paper," which provides money to businesses to meet their short-term, cash-flow needs. However, this investment in something called Golden Key Ltd., which was supposed to pay the city $2 million after several months, flopped. In June 2008, the city sued Wells Fargo Brokerage Services LLC.
On Tuesday evening, the City Council is expected to approve a settlement of the lawsuit, which according to city documents, will pay the city all but $250,000 of its original $1.948 million investment. The settlement also will pay the city $110,000 in attorney's fees and court costs, the city documents say.
The city still may recover more from the investment's underlying assets, it reports.
Back in 2007, City Hall also handled a second investment in commercial paper for the Cedar Rapids/Linn County Solid Waste Agency. That investment, called Rhinebridge LLC, has recently been tied to a larger investment called Abacus, which has Goldman Sachs in litigation with the U.S. Securities and Exchange Commission.
The solid waste agency's investment was to have paid $6 million over the course of a few months, but did not. The agency had recouped part of the investment in 2008, lessening its loss to $2.64 million. The Solid Waste Agency also sued Wells Fargo Brokerage Services LLC, and the agency, too, has reached a settlement with Wells Fargo, city officials report.
The agency has not returned a phone call to specify what its settlement amounts to.