“This agreement resolves a consolidated securities class action lawsuit involving the company, several former executives and the principal, who have not worked with the company for several years,” said a Wells Fargo spokesperson. “While we disagree with the allegations in this case, we are pleased to have resolved this issue.”
It’s the latest punishment to emerge from a years-long scandal. In 2016, Wells Fargo admitted that millions of accounts were opened that weren’t requested by customers. The bank has fired more than 5,000 employees who opened fake accounts to win bonuses or keep their jobs, as some customers wrongly charged overdraft fees and assaulted their credit scores.
The Fed imposed a series of approval orders in 2018 that prevented the bank from growing further through mergers and acquisitions, along with other restrictions tied to plans to improve corporate governance.
Some of the bank’s shareholders, including several pension administrators, later accused Wells Fargo of misleading them about its compliance with these consent orders. They claimed that the bank moved more slowly in addressing its problems than was publicly suggested, hurting investors when the bank’s share price later fell.
The shareholder lawsuit focuses on public statements and regulatory filings in which the bank touts progress in complying with approval orders between 2018 and 2020.
“In reality, however — and without the knowledge of the investing public — Wells Fargo was far from complying with regulators’ directives, including repeatedly submitting underdeveloped and inadequate processing plans, struggling to meet deadlines, and failing to implement meaningful reforms,” the plaintiffs wrote. In a legal complaint initially filed in June 2020.
The bank’s share price fell more than 10 percent over two days after a report was released on its compliance with approval orders, and fell again when members of the House Financial Services Committee requested a federal investigation. The drop in stock prices coincided with the broader stock market turmoil caused by the onset of the coronavirus pandemic.
The class action lawsuit was led by pension administrators in Rhode Island and Mississippi, who said their holdings were affected by the bank’s misleading statements.
“The pension fund lost money because of their lies, so we hold them accountable,” Rhode Island State Treasurer James Diusa said in an interview Tuesday.
He added that he hoped the settlement would make the bank more cautious about future exposures to investors.
“I firmly believe that this is a historically important case as well, because it will help shape the next few years ahead for Wells Fargo and their behavior,” Diosa said.
Laura Posner, an attorney at the law firm Cohen Milstein, who represented the plaintiffs, called the settlement “very impressive” in terms of what the plaintiffs believed were factual damages. “On a larger scale, we hope it will be a way to deter … other companies from engaging in fraud,” said Posner.
It is the latest in the payments chain to Wells Fargo. Last year, the Consumer Financial Protection Bureau ordered the bank to pay $3.7 billion to settle claims that messed up borrowers’ auto and mortgage loans. It separately agreed to resolve a different class action lawsuit for $300 million it alleged improperly charged hundreds of thousands of customers for auto insurance they did not need.
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