Wells Fargo & Co. has reached a settlement in a shareholder class-action lawsuit, agreeing to pay $1 billion. The lawsuit alleged that the bank had made misleading statements regarding its compliance with federal consent orders following the 2016 scandal involving the unauthorized opening of customer accounts.
Lawyers representing the investors filed a request with a Manhattan judge to approve the settlement, which is ranked among the top six largest securities class-action settlements of the past decade. The investors filed the lawsuit in 2020, accusing former CEO Tim Sloan and other executives of providing misleading testimony before Congress, as well as to investors and the media.
The investors claimed that the executives painted an overly optimistic picture of their interactions with regulators, failing to disclose that their initial reform plans had been rejected by authorities. The settlement funds will be distributed to investors who purchased Wells Fargo stock between February 2, 2018, and March 12, 2020.
A spokesperson for Wells Fargo stated that the agreement resolves the consolidated securities class-action lawsuit involving the company, former executives, and a director who have not been associated with the bank for several years. The spokesperson added that while they disagree with the allegations, they are pleased to have resolved the matter.
The news of the settlement was initially reported by the Wall Street Journal. This settlement follows a previous agreement in 2017, where Wells Fargo settled the fake-accounts scandal with executives and directors for $320 million, as well as a 2018 shareholder settlement costing the company $480 million. In 2020, the bank agreed to a $3 billion settlement to resolve US investigations into widespread consumer abuses spanning over a decade, enabling them to avoid criminal charges.
While previous investigations had shed light on the sales abuses, the 2020 settlement provided further details on the high-pressure environment that drove numerous low-level employees to engage in unlawful practices, often resulting in termination when caught by internal controls. Prosecutors at the time revealed that many within the bank referred to these abusive sales practices as “gaming.”
