Wells Fargo is settling a class-action lawsuit from shareholders for $1 billion over claims the bank misled them about how it was complying with regulators in the aftermath of its fake sales scandal
NYT
Wells Fargo is settling a class-action lawsuit from shareholders for $1 billion over claims the bank misled them about how it was complying with regulators in the aftermath of its fake sales scandal, new court records show.
The federal suit claimed the bank made “materially false and misleading statements” about its compliance with consent orders it had with federal regulators over previous practices. Wells Fargo has faced regulatory sanctions since the 2016 scandal, when it was discovered the bank opened millions of accounts for customers without their permission.
A proposed settlement order in the class-action case was filed late Monday, records show. The settlement still needs to be approved by the court.
Wells Fargo is based in San Francisco but has its largest employee base in Charlotte, with about 27,000 workers here.
“This agreement resolves a consolidated securities class action lawsuit involving the company and several former executives and a director, who have not been with the company for several years,” the bank said in a statement Tuesday to The Charlotte Observer. “While we disagree with the allegations in this case, we are pleased to have resolved this matter.”
If approved, the $1-billion deal likely would be the 17th-largest settlement of a shareholder class-action suit, the Wall Street Journal reported.
One of the court-appointed lead plaintiffs in the case was the Employees’ Retirement System of Rhode Island.
“Wells Fargo betrayed the trust of Rhode Island pensioners and now is rightly facing consequences because of that,” said Rhode Island General Treasurer James Diossa in a statement. “I am proud that ERSRI stood up for its stakeholders and held Wells Fargo accountable for its misconduct, and for achieving the historic settlement.”
The settlement class consists of people or entities that purchased common stock in Wells Fargo between Feb. 2, 2018, and March 12, 2020, according to the lawsuit. That means anyone who owned Wells Fargo stock during that time is automatically part of the class-action group, Diossa’s office said.
Certain groups were excluded from the settlement, the proposed agreement notes, including Wells Fargo officers and directors, and shareholders who request from the court they be excluded from the settlement.
Claims in the Wells Fargo class-action suit
The class-action suit was filed in 2020 in federal court for the Southern District of New York. It focused on Wells Fargo’s actions in dealing with 2018 consent orders it had with its regulators.
The bank misled investors when it claimed it was in compliance with those orders when it “had yet to even submit an acceptable plan or schedule for compliance to the regulators,” according to plaintiffs’ claims in the lawsuit.
They claimed that Wells Fargo also was “nowhere near” meeting regulators’ requirements that were a precursor to lifting restrictions for the bank, including an asset cap, which the bank remains under. When the pace of the bank’s actions was revealed, including in congressional hearings, the bank’s stock price fell, the suit said.
In fact, Wells Fargo’s valuation plummeted by more than $54 billion over a two-year period ending in March 2020, Reuters reported.
Other Wells Fargo settlements and scandals
The fake sales scandal was the first of a number of activities by Wells Fargo that fell under federal scrutiny.
And a former top executive is facing prison time. In March, Carrie Tolstedt, the veteran leader of Wells Fargo’s retail banking division, agreed to plead guilty in federal court to obstructing a government examination of the bank’s misconduct.
Tolstedt faces up to 16 months in prison. In a separate civil settlement, she was banned from working in the banking industry and must pay a $17 million penalty.
Last December, Wells Fargo agreed to $3.7 billion in fines and restitution in a settlement with regulators to resolve issues related to auto lending, mortgages and consumer deposit accounts.
The Consumer Financial Protection Bureau ordered Wells Fargo to pay a $1.7 billion fine, and refund more than $2 billion to customers for “widespread mismanagement” of those types of accounts. The bank was going to be required in a new consent order to pay the fine, pay back customers and stop charging surprise overdraft fees, among other things.
In September 2022, the bank reached a $145 million settlement with the U.S. Labor Department following an investigation into concerns over the the bank’s contributions to its 401(k) plan.
And in 2018, Wells Fargo was charged a combined $1 billion by the CFPB and the Office of the Comptroller of the Currency for auto-lending and mortgage practices that hurt consumers.
This story was originally published May 16, 2023, 8:16 AM.
