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.

Also read:Wells Fargo investors vote yes on annual report of workplace harassment and discrimination after settlements, sham-interview claims

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.”

Also read:Wells Fargo hit with $98 million fine for providing trade tech that skirted economic sanctions

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.”

Also read:Wells Fargo ordered to pay $3.7 billion for alleged mismanagement of auto loans, mortgages and deposit accounts

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 .

Also read:CFPB’s allegations against Wells Fargo: illegal fees, wrongful car repos and misapplied payments

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-16-23 1554ET

Copyright (c) 2023 Dow Jones & Company, Inc.