Wells Fargo agreed to pay $1 billion to settle a class-action lawsuit filed by shareholders who claimed the bank overstated its progress in complying with regulatory orders related to its 2016 fake accounts scandal.
The bank entered the settlement Tuesday in U.S. District Court for the Southern District of New York with plaintiffs that included the Employees’ Retirement System of Rhode Island (ERSRI), the Public Employees’ Retirement System of Mississippi, the Louisiana Sheriffs’ Pension & Relief Fund, and Swedish bank Handelsbanken Fonder AB. The settlement was preliminarily approved by Judge Gregory Woods.
The plaintiffs alleged Wells Fargo and several of its executives, including former Chief Executive Timothy Sloan, made false and misleading statements about the bank’s progress complying with 2018 consent orders imposed by regulators, including the Federal Reserve Board, the Treasury Department’s Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau, to rectify improper banking practices and deficiencies in corporate oversight in the aftermath of the fake accounts scandal.
In February 2020, Wells Fargo agreed to pay $3 billion in fines and penalties and entered into a three-year deferred prosecution agreement to settle charges laid by the Department of Justice and Securities and Exchange Commission regarding the scandal.
In March 2020, the House Financial Services Committee released a report concluding Wells Fargo was not in compliance with the consent orders and had not taken sufficient steps to address the deficiencies the regulators had found. The bank’s stock price fell; shareholders blamed the contents of the report.
“Wells Fargo betrayed the trust of Rhode Island pensioners and is now rightly facing consequences because of that. I am proud that ERSRI stood up for its stakeholders and held Wells Fargo accountable for its misconduct and that we achieved this historic settlement,” said Rhode Island General Treasurer James Diossa in a statement.
In a statement, a Wells Fargo spokesperson said, “While we disagree with the allegations in this case, we are pleased to have resolved this matter.”