MANHATTAN (CN) — Wells Fargo agreed to pay $1 billion to settle a lawsuit from shareholders who said the fake account scandal of 2020 belied the commitment it had made years earlier to clean up its business practices.
The litigation erupted after Wells Fargo copped a $3 billion deal to resolve criminal and civil claims over evidence that its employees had engaged in “gaming” practices for 14 years. Under pressure to hit unrealistic sales goals, the workers would use customer data to commit several types of fraud, including opening new accounts and credit lines without customer consent; moving large sums to authorized accounts; creating phony PINs; and forging customer signatures.
According to a deferred prosecution agreement in 2020, the bank's own leaders knew about the practices as early as 2002 but allowed them to continue.
The new settlement, which Wells Fargo lawyers filed Monday in the Southern District of New York, offers investors $1 billion to drop their claims about the bank's apparent failure to uphold commitments that the bank made to the Federal Reserve System and other regulators in 2018.
Shareholders claim that “Wells Fargo made false and misleading statements to investors regarding its compliance with the 2018 consent orders, claiming that it had regulator-approved ‘plans’ and that it was ‘in compliance’ with the 2018 consent orders,” as explained in the settlement, which still must be approved by a judge.
“Lead plaintiffs allege that, in reality, Wells Fargo had yet to even submit an acceptable plan or schedule for compliance to the regulators and was nowhere near meeting the regulators’ requirements that were a predicate to lifting restrictions that had been imposed on Wells Fargo, including an asset cap.”
Once congressional hearings, reports and other sources unearthed the true story, the shareholders say, stock prices fell.
The class is made up of those who bought stocks from February 2, 2018, through March 12, 2020. Handelsbanken Fonder AB, a Stockholm-based bank, as well as pension administrators in Mississippi, Rhode Island and Louisiana were appointed by the court as lead plaintiffs in the November 2020 lawsuit.
Sunny Rodriguez, a spokesperson for Wells Fargo, noted that the former executives and director named as defendants to the lawsuit left the company several years ago.
“While we disagree with the allegations in this case, we are pleased to have resolved this matter,” Rodriguez said in a statement.
As of Tuesday Wells Fargo had a $144 billion market cap.
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