Investors urge judge to advance Wells Fargo diverse hiring lawsuit

Dive Brief:

• Several Wells Fargo shareholders are asking a California federal judge to allow a lawsuit over the bank’s diverse hiring policy to proceed, after the bank requested the complaint be dismissed earlier this year.
• The lawsuit follows a New York Times article from May 2022, in which a dozen current and former employees alleged the firm held phony job interviews for nonwhite and female job-seekers for positions that had already been offered to other candidates.
• In the proposed class-action lawsuit, which names the bank, CEO Charlie Scharf and other executives as defendants, investors claim Wells Fargo committed securities fraud based on the way the lender promoted the policy to the market.

Dive Insight:

Shareholders claim the San Francisco-based bank, after the Times report was published, “doubled down, brazenly repeating … misleading statements” and assured investors that the bank’s diverse hiring policy was working.

“[I]t was misleading for defendants to repeatedly highlight the policy and tout their compliance therewith when in reality Wells Fargo was conducting widespread fake interviews to maintain the appearance that it was advancing diversity efforts,” the investors, which include Swedish asset manager SEB Investment Management and West Palm Beach Firefighters’ Pension Fund, said in the brief, filed last week.

A follow-up article by the Times included allegations that sham interviews had taken place across multiple Wells Fargo business lines for years, and revealed a government probe into the practice. 

The bank’s stock price fell more than 10%, “erasing $17 billion in shareholder value and causing significant damage to Plaintiffs and the Class,” the lawsuit claimed.

Under Wells Fargo’s original diverse slate hiring policy, at least half of the interviewees for most positions earning over $100,000 per year were required to be diverse.

After a pause, the bank reinstated a revised hiring policy in August, applying its diverse-candidate requirement to roles based on job level rather than compensation. 

The bank, in a statement Tuesday, said it disagrees with the shareholders’ claims. 

“At Wells Fargo, we are deeply dedicated to diversity, equity and inclusion,” a bank spokesperson said. “Our diverse slate guidelines for hiring, which are a best practice across many industries, are intended to, and have contributed to, measurable increases in diverse representation across the company.”

In its April brief, aimed at having the lawsuit dismissed, Wells Fargo said the plaintiffs failed to prove there was widespread noncompliance with the bank’s interview guidelines.

The bank said shareholders didn’t offer any evidence that executives had knowledge of the alleged sham interviews.