Sep. 20--When Michael Jones of Vancouver placed a half million dollars in an account with Wells Fargo Bank three years ago, a bank broker handling the transaction described his investment as safe and short-term. Jones (not his real name) could get his money out any time, he said.

That turned out to not be true. Since then, Jones has been trying to recover the money he had set aside as a reserve for his growing software company.

The businessman is among thousands of investors in Washington and across the U.S. caught in a $330 billion nationwide investment scandal in which banks allegedly misled consumers about the level of risk involved in what they called auction-rate securities -- 30-year bond packages sold in chunks as short-term investments.

Lawsuits and injunctions by state and federal regulators over the past two years have forced all but one of the largest investment banks involved in the scandal to buy back the bonds from individual investors such as Jones.

But Washington's Department of Financial Institutions securities division, the state agency leading the charge against San Francisco-based Wells Fargo, has so far had little success reaching a settlement. At stake are investments worth as much as $3.93 billion nationwide with $175 million of that tied to Washington state clients such as Jones.

Wells Fargo says it did nothing wrong and that the collapse of financial markets in the past two years were beyond what anyone could have predicted.

Some are saying that state negotiators are over their heads and somebody else (another state) should be in charge of the Wells Fargo case. Banking officials in nine states took up the investigations. All but Washington have reached settlements with banking titans such as Bank of America, Wachovia and Citigroup.

"We can't force them to settlement," said Michael Stevenson, director of DFI's securities division when questioned about the situation.

Wells Fargo's investment arms -- Wells Fargo Investments, Wells Fargo Brokerage Services and Wells Fargo Institutional Securities -- sold nearly $4 billion in auction-rate securities.

The bank disputes Washington's claim that it intentionally misled investors.

Jones doesn't buy it.

"I can't figure out why a generally reputable company like Wells Fargo wouldn't just go out and do the right thing," said Jones, who fears bank retaliation if his real name were used in this report.

"I had a good business relationship with Wells Fargo, and we acted on their recommendations and we believed what they told us," he said, "and when things got tough they headed for the hills."

First sign of trouble

For Jones, the first sign of trouble was a tiny asterisk on the software company's monthly bank statement from Wells Fargo. The matching fine print stated its two $250,000 auction-rate certificates may have become "illiquid."

That was it. No letter explaining why half a million in funds suddenly weren't available. No phone call from the bank offering to fix the situation. Just an asterisk, said Jones.

Numerous meetings and phone calls later, the company learned its investments were locked up indefinitely with little hope of immediate recovery. Jones and investors across the country are now relying on Washington regulators to help them get their money back.

Washington was among nine states to join a task force of state regulators organized by the North American Securities Administrators Association in April 2008 to investigate auction rate securities fraud along with the federal Securities Exchange Commission.

They discovered that more than 20 investment banks were selling long-term municipal bonds and student loans packaged in chunks known as auction rate securities and allegedly telling investors they were low-risk, short-term investments, similar to money market accounts.