After the 2016 controversy concerning the establishment of illegal client accounts, Wells Fargo agreed to pay $1 billion to resolve a shareholder lawsuit accusing it of making deceptive claims about its compliance with federal consent decrees.
It is the latest in a series of settlements and fines the bank has paid since a fraud scandal surfaced over a decade ago. According to The New York Times, details of the arrangement were filed with the court on Monday, May 15. Due to unreasonable sales quotas, bank personnel established millions of fake accounts in clients' names between 2002 and 2016.
Wells Fargo fired many high-ranking employees and promised regulators it would end the practices that led to the crisis and that placed consumers at risk.
Settlement to Compensate Investors, Customers
After authorities found several of the issues in 2018, the newest settlement resolves a lawsuit initiated on behalf of shareholders focusing on the bank's behavior from 2018 to 2020. Investors were misled, according to the plaintiffs, who included pension funds from Mississippi, Rhode Island, and Louisiana, because Wells Fargo made it seem like it was further along in the process of confronting regulators' directives than it really was.
The Wall Street Journal first reported the agreement, which is subject to approval by a federal court in New York.
In a report by The Washington Post, Wells Fargo spokesperson Laurie Kight said in a statement that the settlement "resolves a consolidated securities class-action lawsuit involving the company and several former executives and a director, who have not been with the company for several years."
State employees, nurses, teachers, police officers, firefighters, and others had their retirement savings hurt by Wells Fargo's fraudulent business practices. This settlement, if approved, will help compensate them, according to Steven J. Toll, managing partner at Cohen Milstein Sellers & Toll, representing the investors in the suit.
Years of Scandals
According to The New York Times, Wells Fargo has been mired in scandal for years, with allegations of phony accounts, inappropriate mortgage modifications, and the unintentional leaking of sensitive customer information.
The bank settled Consumer Financial Protection Bureau allegations of several banking crimes in December 2022 for $3.7 billion. More than a decade of inquiries into Wells Fargo's treatment of customers resulted in a $3 billion settlement payment set for 2020.
The bank has seen two CEO departures in the previous seven years, with John G. Stumpf, who left in 2016, and Timothy Sloan, in 2019. The bogus accounts controversy resulted in the guilty plea of a high-ranking employee, Carrie L. Tolstedt, in March. She faces up to 16 months in jail if convicted.
