Wells Fargo asks judge to dismiss investors' class action suit claiming it used fake interviews to skirt diversity policy

SAN FRANCISCO (CN) — Wells Fargo asked a federal judge on Tuesday to dismiss a class action that claims the banking giant conducted fake job interviews in order to meet its diversity hiring policy.

The bank’s attorney, Brenden Cullen, told U.S. District Judge Trina Thompson in a hearing on the motion to dismiss that the plaintiff — a shareholder who filed the suit on behalf of anyone who bought stock in the company between Feb. 24, 2021, and June 9, 2022 — had no specific information about the fake interviews or any Wells Fargo executive’s supposed knowledge of them.

The complaint claims that some Wells Fargo employees conducted fake interviews to get around the company’s diversity guidelines, which required that at least 50% of candidates interviewed for positions that have salaries of more than $100,000 a year represented an underrepresented racial, ethnic, or gender group or were veterans, people with disabilities or members of the LGBTQ community.

According to the complaint, in May and June 2022, the New York Times wrote articles detailing the interviews, and Wells Fargo’s common stock price plummeted.

The plaintiffs argue that Wells Fargo execs knew about the practice of fake interviews, so the company’s statements made in reports and notices filed with the Securities Exchange Commission and press releases, which emphasized the company’s commitment to improving workforce diversity, were materially false.

Cullen argued Tuesday that the plaintiffs could not prove Wells Fargo execs knew that the fake interviews were happening, thus they could not prove that public statements were deliberately false or misleading.

“If it’s not recorded somewhere … There has to be some information that these interviews were fake conveyed to the defendants,” Cullen said. If not, then there is no way to prove the defendants knew the fake interviews were happening, Cullen added.

The number of fake interviews and when they happened also is in dispute. Cullen said that there is no way of knowing how many fake interviews there were, and that, if they occurred, they may have happened outside of the class period. He also took issue with claims the interviews were systemic, saying there’s no way to prove that.

Cullen said that Wells Fargo executives could not deliberately make a false statement if they were not aware any wrongdoing was happening.

Plaintiffs’ attorney Sharan Nirmul pleaded scienter in the case, which requires the plaintiffs to allege facts that give rise to a strong inference of fraudulent intent.

Nirmul claimed that the interviews with numerous former employees in the New York Times articles, plus the fact that the Department of Justice and other regulatory agencies opened investigations based on those employees’ claims, was proof that the fake interviews were widespread and tolerated throughout the company. There was no need for a “smoking gun,” Nirmul said.

“These are people that the government thinks are credible,” Nirmul said.

In his rebuttal, Cullen said that inferences were insufficient.

“You have to show that this specific information was available,” to Wells Fargo executives to successfully plead scienter, Cullen said.

Cullen argued that there was no way to know who talked to the New York Times, what departments they worked in, if they were current or former employees, and if their claims about fake interviews even related to the class period in question.

In his closing remarks, Nirmul said that Wells Fargo CEO Charles Scharf, named as a defendant in the complaint, had the ability to control his employees but chose not to. Fake interviews were an “entrenched” practice in the company, an open secret that executives had to know about, she said.

“We don’t have a document to point you to,” Nirmul said, because misconduct is rarely written down.

Thompson took the matter under consideration. If the defendants’ motion to dismiss is granted, plaintiffs will have 21 days to file an amended complaint.