Wells Fargo Will Pay $1 Billion To Settle Unauthorized Accounts
Wells Fargo is paying out $1 billion to resolve a class action lawsuit alleging that the bank misled investors about the extent of its efforts to improve its procedures following the bogus accounts crisis. The firm is accused of misleading investors by overstating the extent of its improvements.
According to the counsel for the plaintiffs, if the deal is accepted by the court, it will rank among the biggest settlements ever in a securities class action lawsuit.
Pension funds from Louisiana, Mississippi, and Rhode Island are among the plaintiffs.
According to a Monday press release from Cohen Milstein Sellers & Toll’s managing partner Steven Toll, if approved, this settlement will assist in reimbursing hundreds of thousands of investors, including state employees, nurses, teachers, police, firefighters, and others, whose vital retirement savings were impacted by Wells Fargo’s dishonest business practices.
What controversy arose from a Wells Fargo account?
The class action litigation was brought in 2020, not long after Wells Fargo committed to pay $3 billion to resolve claims arising from the bogus account issue.
According to the Securities and Exchange Commission, the bank encouraged consumers to purchase unnecessary items between 2002 and 2016 and launched millions of unlawful or fraudulent financial accounts to reach sales targets.
Since then, the business has reportedly changed the makeup of its management team and done away with all product-based sales targets.
Why did investors file a lawsuit?
After the fake accounts at the bank were discovered, the bank and federal authorities engaged in consent decrees, one of which subjected Wells Fargo to an asset limitation that restricts its expansion until it complies fully. Part of the orders requires Wells Fargo to create a strategy to find and fix any possible present-day and future consumer damage.
Asserting that authorities were pleased with the bank’s compliance with the directives, Wells Fargo executives, according to the plaintiffs, deceived investors.
However, a report released in March 2020 by the House Financial Services Committee found that Wells Fargo was not adhering to the consent orders and “fell woefully” short of putting into place significant corporate reforms. As a result, Wells Fargo’s share price dropped.
According to Wells Fargo management, it is unclear when the stock cap would be removed.
Well Fargo Management’s Explanation
The corporation is cited as a defendant in the complaint together with the former CEO Timothy Sloan, the former CFO John Shrewsberry, the former general counsel Allen Parker, and the former chairperson Elizabeth Duke.
According to a statement from Sunny Rodriguez, a spokesman for Wells Fargo, this deal ends a combined securities class action case involving the business and numerous former executives and shareholders who have not been with the organization for a number of years.
He added that they are happy that this matter has been resolved, even though they disagree with the claims made in this case.
This article was originally posted on- USA Today (Wells Fargo agrees to pay investors $1B to settle class action lawsuit (usatoday.com)