Wells Fargo officials reach $ 240 million settlement on fake accounts


A Wells Fargo logo is seen at the SIBOS Banking and Financial Conference in Toronto
FILE PHOTO: The Wells Fargo logo is presented at the SIBOS Banking and Financial Conference in Toronto, Ontario, Canada on October 19, 2017. REUTERS / Chris Helgren

March 1, 2019

By Jonathan Stempel and Dena Aubin

(Reuters) – Wells Fargo & Co executives and executives reached a $ 240 million settlement with US shareholders for the creation by bank employees of millions of unauthorized accounts.

The settlement was filed last Thursday in the San Francisco Federal Court and requires the approval of a judge.

It resolves the accusations that officials breached their fiduciary duties by knowing or knowingly ignoring false accounts and by not putting an end to their creation.

Insurers of 20 current and former Wells Fargo executives and directors, including chief executive Tim Sloan and predecessor John Stumpf, will pay $ 240 million to the bank. The officials denied that they had done something wrong.

Wells Fargo spokesman Peter Gilchrist declined to comment on Friday.

The San Francisco-based bank has been plagued by scandals related to its sales practices since its agreement in September 2016 to pay $ 190 million to settle the government's claims that it created customer accounts without authorization.

The indignation provoked by the settlement and the treatment of the fallout by the bank led to the departure of Stumpf. Subsequently, other commercial abuses were reported, including the billing of superfluous auto insurance by Wells Fargo and the imposition of excessive mortgage fees.

The shareholders of Thursday's settlement were run by pension plans in Alabama and Colorado.

Their lawyers have called the agreement "the largest cash settlement funded by an insurer in a lawsuit involving derivatives by a US shareholder," exceeding the $ 139 million News Corp deal. in 2013 on the treatment of a hacking scandal in Britain.

Shareholders sue on derivative products on behalf of corporations, generally where the defendants are officers or members of the board of directors, with the proceeds accruing to the companies.

In May, Wells Fargo reached a settlement of $ 480 million following a lawsuit for securities-related fraud by shareholders in unauthorized accounts.

Wells Fargo said Wednesday it will pay $ 2.7 billion more than expected on December 31 to solve legal problems, against $ 2.2 billion three months earlier.

In January, Wells Fargo released a report that it had improved risk monitoring and accountability, including eliminating sales targets and recovering executive compensation.

Sloan remains under pressure and faces calls from Senator Elizabeth Warren, a member of the Democratic Party of the United States presidential candidate for the 2020 presidential campaign, for his ouster.

The case is In Wells Fargo & Co, Shareholder Derivatives Litigation, US District Court, Northern District of California, No. 16-05541.

(Report by Dena Aubin and Jonathan Stempel in New York, edited by Susan Thomas and Richard Chang)

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