Wells Fargo has reached a settlement agreement with investors who claim they were misled about a scandal involving fake accounts. The $480 million settlement was approved by a federal judge in mid-December after a lengthy lawsuit. Wells Fargo did not admit to any guilt in the suit, but executives say they are looking to put the matter to rest.
Between 2002 and 2017, Wells Fargo employees opened approximately 3.5 million fraudulent accounts for existing customers. Employees of the bank, who were incentivized to get customers to sign up for multiple accounts, forged customers’ signatures to earn sales bonuses. Customers were subjected to fees associated with their fake accounts, and some saw an impact on their credit score. The San Francisco-based bank paid federal fines of $185 million and agreed to pay affected customers a settlement of $142 million. As part of the initial settlement, which was approved in June, they also pledged to do away with sales quotas for credit cards and other products.
Lies to Shareholders Falsely Inflated Stock Price
The most recent settlement is the result of multiple class action lawsuits filed on behalf of Wells Fargo investors, led by Union Asset Management. Shareholders were kept in the dark and presented with misleading information about their sales tactics, according to the lawsuit. The suit alleges that Wells Fargo committed securities fraud by failing to disclose the truth about its fake accounts and continuing to tout the success of its cross-sales model, which inflated stock prices; between 2014 and 2016, shares peaked at $53, before eventually falling to $41 per share. Investors became aware of the problem after investigations by regulators, lawsuits, internal reports, comments from employees, and a 2013 L.A. Times article tipped them off.
The $480 million settlement will include $95.9 million in attorneys’ fees and award 35 cents per share to any individuals or entities who purchased Wells Fargo shares between February 26, 2014 through September 20, 2016. Eligible shareholders must come forward by January 23, 2019 to claim their share of the settlement. A statement issued after the settlement was approved makes it clear that Wells Fargo denies wrongdoing but wished to avoid drawing out the matter and incurring additional costs.
Since the revelation of its fraudulent accounts in 2016, Wells Fargo has been focused on rehabilitating its image. Their statement after the settlement said that they are pleased that the suit has been settled. Moving forward, the bank is committed to making customers their top priority and rebuilding the trust that was lost for the benefit of their stakeholders. The bank remains the third largest in the United States and was valued at $265 billion in June.
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