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The bank's legal problems in the Wells Fargo scandal (WFC) continue to worsen – the cost of settlements and lost revenue over the past three years has risen to $ 4.5 billion.
In fact, the oversight exercised by the executives and the board of directors was so bad that shareholders are now recovering money – insurers from the bank.
A regulatory filing this week showed that San Francisco-based Wells Fargo had reached an agreement to resolve lawsuits over derivatives of instruments, alleging "actions in breach of duty, inter alia, against current and former directors and officers for their alleged failure to detect and prevent business problems. "
The insurance companies of Wells Fargo are going to "pay about $ 240 million to the company for the damage allegedly caused to the company," according to the record. In other words, the money would theoretically be returned to the bank's treasury for the benefit of shareholders.
The case stems from the well-known admission that Wells Fargo has opened millions of unauthorized accounts on behalf of customers, as part of employees' efforts to meet the ambitious sales targets set by management. The activity lasted years before the eruption of 2016, resulting in the departure of former CEO John Stumpf, and draconian sanctions from the Federal Reserve.
Legal and regulatory issues weighed on the Wells Fargo share price, with a total return comprising only 15% dividends over the last three years, compared to 52% for the Standard & Poor's index. s 500 major US stocks and 97% for the country. the largest bank, JPMorgan Chase (JPM).
In part as a result of the Federal Reserve's order, Wells Fargo had to amend its board of directors, resulting in the departure of several directors who failed to prevent the abusive practices of the customer base. Among them, Enrique Hernandez Jr., owner of a private security company, who, after obtaining a seat on the board, managed to put pressure on former CEO Richard Kovacevich, with a view to making lucrative deals on some of the bank's branches in California.
According to the latest agreement, Wells Fargo will pay the plaintiffs 'attorneys' fees under the agreement, according to the disclosure.
In an email, Peter Gilchrist, spokesman for Wells Fargo, said the bank would not provide additional details on the agreement, beyond what was disclosed in the file, which did not specify fees. lawyers nor the names of insurance companies.
Kevin LaCroix, who follows management's accountability issues as Executive Vice President of RT ProExec Claims Advisor, said in a phone interview that he had reviewed the underlying settlement documents and that he had not been able to do so. they stipulated $ 68 million in legal fees.
The payment of the insurers, as disclosed by Wells Fargo, would represent the second largest recovery ever recorded for such a shareholder-related lawsuit following the $ 275 million settlement by Activision Blizzard Inc. (ATVI) in 2014, said LaCroix.
"That's pretty good for shareholders," LaCroix said. "No matter how you cut it, it's a lot of money."
A Pyrrhic victory, of course. But finally, a little something in return for the shareholders.
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