Wells Fargo & Co. has agreed to pay $1 billion to settle a lawsuit accusing it of defrauding shareholders over its progress in recovering from a series of scandals over its treatment of customers.
A preliminary settlement of the proposed class action lawsuit was filed late Monday night in federal court in Manhattan, and requires judge approval. Court papers showed that the dollar amount was suggested by a broker.
Wells Fargo (WFC) It has been operating since 2018 under approval orders from the Federal Reserve and two other financial regulators that require improved governance and oversight.
The fourth-largest US bank is also subject to an asset cap by the Federal Reserve, which could hinder its ability to compete with larger competitors. JPMorgan Chase & Co (JPM)And Bank of America Corp (Buck) And City Group Corporation (c).
Shareholders accused Wells Fargo of exaggerating how well it complied with those orders, and that the bank’s market value fell by more than $54 billion over the two years ending in March 2020 as the shortcomings became known.
Wells Fargo did not immediately respond to requests for comment outside of business hours.
Court papers showed that the San Francisco-based bank denied any wrongdoing, and settled for shedding the burden and expense of litigation. Plaintiffs’ attorneys can claim up to 19% of the settlement fund for legal fees.
Wells Fargo since 2016 has paid or committed several billion dollars to resolve investigations and regulatory litigation regarding its business practices.
Among them, it opened about 3.5 million accounts without the customer’s permission, and charged hundreds of thousands of borrowers for car insurance they didn’t need.
Repairing the reputation of the 171-year-old bank founded by Henry Wells and William Fargo has taken longer than expected when he took over in 2019, CEO Charlie Scharf said.
“When I arrived, we did not have the culture, the effective processes, or the appropriate management oversight to address weaknesses in a timely manner,” he said in his March 3 shareholder letter. “Today, we approach these issues differently.”
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