Wells Fargo resolves shareholder suit with $1 billion payment
By Steve Gelsi
The lawsuit brought by institutional shareholders alleged 'false and misleading statements' surrounding the bank's compliance with a 2018 regulatory consent order
Wells Fargo & Co. (WFC) has settled a shareholder lawsuit with a payment of $1 billion stemming from allegations it misled investors about its corrective measures following a scandal involving fake accounts at the bank, according to a court filing and a bank spokesperson.
The Wall Street Journal initially reported the settlement citing court documents.
The $1 billion payment ranks among the top six securities class-action settlements since 2013 and among the top 17 of all time, according to the court filing, which followed a three-year mediation process under former federal Judge Layan R. Phillips.
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The settlement comes after allegations from the plaintiffs that the bank "made false and misleading statements" on the status of its compliance with a 2018 consent order for the bank from federal regulators regarding the timing for lifting an asset cap. This caused a decline in the bank's share price, the suit alleged.
The bank argued that stock-price declines were caused by other factors such as the impact of COVID-19 and "unrelated news about its financial performance."
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The 2018 consent order came after the bank's fake-accounts scandal, which surfaced in 2016 and centered on phony accounts created, without the consent of customers, by bank employees trying to meet sales targets.
"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," a bank spokesperson said. "While we disagree with the allegations in this case, we are pleased to have resolved this matter."
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The plaintiffs included Handelsbanken Fonder AB, the Public Employees'Retirement System of Mississippi, the Rhode Island general treasurer and the Louisiana Sheriffs' Pension & Relief Fund.
"The proposed settlement was achieved after nearly three years of hard-fought litigation, substantial motion practice, extensive discovery, and vigorous arm's-length negotiations," the document said.
Shares of Wells Fargo are down 0.6% on Tuesday and have lost 6.7% of their value in 2023, compared with a 7.3% gain by the S&P 500 .
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-Steve Gelsi
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May 16, 2023 15:54 ET (19:54 GMT)
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