Wells Fargo has agreed to pay $1 billion to settle a class-action lawsuit accusing the bank of overstating how much progress it had made in fixing the unlawful practices that regulators said had hurt millions of customers.
The agreement, detailed in court filings on Monday, is the latest in a succession of settlements and penalties the bank has paid stemming from a fraud scandal that came to light nearly a decade ago. From 2002 to 2016, bank employees, facing unrealistic sales goals imposed by their bosses, opened millions of accounts in customers’ names without their knowledge.
Wells Fargo removed top executives and pledged to regulators that it would fix the internal deficiencies that caused the scandal and other practices that put customers at risk.
The latest settlement resolves a lawsuit brought on behalf of shareholders that focused on the bank’s conduct from 2018 to 2020, after regulators identified many of the problems. The plaintiffs, including pension funds in Mississippi, Rhode Island and Louisiana, said Wells Fargo defrauded investors by giving the false impression that it was further along in the process of tackling regulators’ orders than it had disclosed at the time. The settlement, which must be approved by a federal judge in New York, was reported earlier by The Wall Street Journal.
“This agreement 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,” Laurie Kight, a spokeswoman for Wells Fargo, said in a statement. “While we disagree with the allegations in this case, we are pleased to have resolved this matter.”
Controversies have engulfed Wells Fargo for years, including sham accounts, improper mortgage changes and accidental releases of client data.
In December, the bank agreed to pay $3.7 billion to settle claims by the Consumer Financial Protection Bureau that it engaged in an array of banking violations. Wells Fargo agreed to pay $3 billion in 2020 to settle investigations into consumer abuses that lasted for more than a decade.
Twice in the last seven years, the bank’s chief executive has been ousted: John G. Stumpf in 2016, and Timothy Sloan in 2019. A top executive, Carrie L. Tolstedt, pleaded guilty in March to a criminal charge linked to the sham accounts scandal and faces up to 16 months in prison.
“If approved, this settlement will help compensate hundreds of thousands of investors — state employees, nurses, teachers, police, firefighters and others — whose critical retirement savings were impacted by Wells Fargo’s fraudulent business practices,” Steven J. Toll, managing partner at Cohen Milstein Sellers & Toll, which represented the investors in the suit, said in a statement.
