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Sunday, December 10, 2023

$1 billion Wells Fargo settlement for fake accounts gets green light

A federal judge has given the green light to Wells Fargo & Co’s $1 billion settlement of a shareholder lawsuit related to unauthorized customer accounts. This brings the total amount the bank has committed to pay in connection with the scandal to nearly $5 billion. US District Judge Jennifer L. Rochon approved the settlement after a hearing in New York, more than three months after the agreement was reached, according to statements from investors’ attorneys. However, court records have yet to confirm this approval.

The settlement resolves claims filed in 2020, alleging that former CEO Tim Sloan and other bank executives provided misleading statements to investors, the media, and Congress that painted an overly optimistic picture of the company’s interactions with regulators following a 2016 scandal involving the unauthorized accounts. Wells Fargo has chosen not to comment on the approval.

This settlement is considered one of the six largest securities class-action settlements of the past decade and the 17th largest of all time. The funds from the settlement will be distributed to investors who purchased Wells Fargo stock between February 2, 2018, and March 12, 2020. In addition to this settlement, Wells Fargo had previously agreed to pay $800 million to resolve two lawsuits related to the fraudulent accounts and $3 billion to settle US investigations. These investigations found that the bank had set excessively ambitious sales targets, leading employees to open millions of fake accounts for customers to meet these goals, often through false records or identity misappropriation. This unethical practice resulted in millions of dollars in fees and interest and negatively impacted some clients’ credit ratings.

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