Protecting nearly $1 Billion in Michigan Citizen Holdings

FOR IMMEDIATE RELEASE:
September 18, 2008
AG Contact:  John Sellek or Matt Frendewey 517-373-8060
OFIR Contact: Jason Moon 517-335-1700

LANSING - Attorney General Mike Cox today announced that his office and the Office of Financial and Insurance Regulation (OFIR) reached a settlement with Comerica Bank regarding $1.46 billion in Auction Rate Securities (ARS).  The settlement requires Comerica Bank to offer full buybacks to any customer who purchased an ARS from Comerica Securities (a subsidiary of Comerica Bank).  The Auction Rate Securities market collapsed this year, freezing consumers' access to their accounts.

"Today's settlement sends a strong message that the Attorney General's office stands guard, protecting Michigan's economy and consumers," said Cox.  "This settlement will allow citizens to access their money, while helping stabilize an already nervous financial market."

In addition to offering full buybacks, this relief will cost Comerica an estimated $75 million this quarter. 

OFIR also announced that Comerica would have to pay the State of Michigan a civil penalty of $10,000 and $100,000 to the Michigan Investor Protection Trust Fund.

"This settlement represents a major victory for Michigan investors who bought auction rate securities through Comerica Securities," said OFIR Commissioner Ken Ross.  "Our agreement ensures that all Michigan consumers who made these investments will be able to put this nightmare behind them."

Nationwide, Comerica customers hold more than $1.46 billion in Auction Rate Securities, of which nearly $1 billion are held by Michigan citizens.

ARS were represented as a safe and secure investment option to buyers in lieu of money market investments, and were said to have the same liquidity as cash.  When the market for ARS collapsed earlier this year, investors were stunned to learn their accounts were frozen and no longer had access to their money.  The direct result for many investors was money was no longer available to support ongoing business operations. 

For example, one investor had to forego development of a 350,000 square foot retail shopping center that was to be built in the City of Detroit.  This one development alone would have created hundreds of construction jobs, and hundreds more permanent retail jobs.  Because of the ARS failure, the project site will remain empty and undeveloped.

Attorney General Cox contacted Comerica last month about its sale of ARS and urged Comerica to take action to make Michigan investors whole.  This settlement resolves pending investigations into consumers' ARS complaints by OFIR and FINRA (Financial Industry Regulatory Authority) which were initiated earlier this year.  After further scrutiny of their training and marketing materials by FINRA, and OFIR, Comerica agreed to enter a settlement.

Today's settlement allows the Attorney General to go into court to enforce the buyback program and to pursue criminal charges if warranted.