Wells Fargo to pay $1 billion in class-action lawsuit
Wells Fargo agreed to pay $1 billion to settle a shareholder lawsuit that accused it of making misleading statements about its compliance with federal consent orders following the 2016 scandal involving the opening of unauthorized customer accounts.
The settlement is one of the top six largest securities class-action settlements of the past decade, according to lawyers for the investors, who filed a request Monday for a Manhattan judge to approve the accord.
The investors sued the bank in 2020 claiming that its former chief executive officer, Tim Sloan, and other executives made misleading statements in testimony before Congress and to investors and the media.
The investors alleged that the executives presented too rosy a scenario about their interactions with regulators, including not disclosing that their initial reform plans had been rejected by authorities.
Wells Fargo’s use of corporatespeak to pretend it did nothing wrong reflects a tendency of American business regulators to go easy on big companies caught violating the law.
The proceeds of the settlement will go to investors who bought Wells Fargo stock from Feb. 2, 2018, through March 12, 2020.
“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 Wells Fargo spokesperson said. “While we disagree with the allegations in this case, we are pleased to have resolved this matter.”
The news was reported earlier by the Wall Street Journal.
The accord follows a previous settlement four years ago over the bank’s fake-accounts scandal with executives and directors valued at $320 million and a 2018 shareholder accord that cost the company $480 million. In 2020, Wells Fargo agreed to pay $3 billion to settle U.S. investigations into more than a decade of widespread consumer abuses under a deal that let the bank avoid criminal charges.
While the sales abuses had been described repeatedly in earlier probes, the 2020 settlement provided more details on the high-pressure environment that led legions of low-level employees to break the law — often costing them their jobs when they were caught by the firm’s internal controls. Many inside the bank referred to abusive sales practices as “gaming,” according to prosecutors at that time.
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