Topline
Wells Fargo has agreed to pay $1 billion to settle a class action suit over the way it handled the cleanup of its phony account scandal, according to court documents, the latest bill in a series of large settlements as the bank continues to manage fallout from the scheme nearly a decade after its discovery.
Wells Fargo has agreed to settle a class action lawsuit for $1 billion.
Key Facts
The figure, first reported by the Wall Street Journal, is part of a preliminary settlement detailed in court documents filed with federal court in Manhattan late on Monday.
It settles a class action lawsuit from the bank’s shareholders over its handling of the 2016 fake accounts scandal, which alleged the bank moved to fix issues much more slowly than its public declarations suggested and accused executives of painting too optimistic a picture of the bank’s dealings with regulators.
Shareholders involved in the lawsuit include pension funds in Louisiana, Rhode Island and Mississippi and Swedish investment firm Handelsbanken Fonder.
The figure, suggested by a mediator, must still be approved by a federal judge in New York.
If approved, it is likely to be one of the largest class action settlements in history, according to estimates in the court filing.
Proceeds from the settlement will go to investors who purchased Wells Fargo stock between February 2, 2018, through March 12, 2020.
Wells Fargo did not immediately respond to Forbes’ request for comment.
Key Background
The figure adds to a string of penalties, settlements and setbacks faced by Wells Fargo as it works to repair damage from a string of scandals, of which the bank has already set aside billions of dollars to resolve. A large portion of the bank’s troubles stem from the revelation it opened millions of fake accounts for customers without their consent. The scheme, which came to light in 2016, severely damaged the reputation of one of America’s most high profile banks, rocked the financial sector and triggered multiple probes and regulators placed harsh restrictions on the bank in terms of growth, risk management and compliance. Shareholders in the latest suit allege the bank’s market value fell as executives overstated its ability to comply with those orders.
Further Reading
Wells Fargo Ordered To Pay Customers $3.7 Billion For Causing ‘Financial Harm’ (Forbes)
Source: https://www.forbes.com/sites/roberthart/2023/05/16/wells-fargo-agrees-1-billion-payout-to-settle-shareholder-lawsuit-over-fake-account-scandal-cleanup/