Retired Chairman Richard Kovacevich: I wasn't aware of problems at Wells Fargo

Recently retired Wells Fargo & Co. Chairman Richard Kovacevich told jurors Tuesday that he could not recall being advised about investor problems in the bank's troubled security lending program even though bank executives assured clients that the matter was being addressed "at the highest levels."

"I have no recollection," Kovacevich said in a videotaped deposition presented in Ramsey County District Court in St. Paul on behalf of four nonprofit organizations. The nonprofits are suing Wells Fargo for investment decisions in a special short-term investment program that swapped securities for cash collateral that was invested elsewhere.

"You were not advised?" asked plaintiffs' attorney Mike Ciresi.

"I don't recollect ever being advised on securities lending," replied Kovacevich, whose deposition was conducted in October.

Ciresi produced two Wells Fargo e-mails in which executives stated that Kovacevich and current chairman and CEO John Stumpf "are fully aware of the situation and supportive of the position we've taken" not to redeem subsequent client investments at their original value.

When Ciresi pressed Kovacevich whether other company executives were lying when they said Kovacevich and Stumpf had been briefed on the topic, he declined to respond, calling the question "hypothetical."

The trial, now in its third week, contends that Wells Fargo misled clients about the nature of investments contained in the securities lending program. The lawsuit says the bank didn't follow its usual conservative investment strategy and got involved in asset-backed securities, including subprime mortgage paper, that tumbled in value when the country dipped into a recession in the middle of 2007.

In his video testimony, Kovacevich acknowledged that he made speeches in which he said he had little regard for the subprime mortgage securities market and "structured investment vehicles" that specialized in mortgages and other asset-backed securities.

In one speech in September 2007, just as the bank's securities lending program was discovering its investment problem, Kovacevich told an investor conference, according to documents and memos: "We looked at this stuff but it was so toxic. We didn't even originate this stuff, let alone buy it."

But Kovacevich said in his deposition that he was unaware that the Wells Fargo security lending program had investments in those areas.

"I really don't know much about this program at all, or have practical involvement," he said.