SAN FRANCISCO–Wells Fargo has agreed to another settlement related to its fake-accounts scandal, this time to settle a class action lawsuit.
Wells Fargo has paid a $480-million settlement to bring to a close a suit that accused it of securities fraud, with the suit–filed with the U.S. District Court in San Francisco–alleging Wells Fargo "knew but deliberately failed to disclose known material true facts" about its actions, including "that the company's cross-selling strategy was not focused on or designed to benefit customers."
Instead, the suit alleged, the bank’s actions were "designed to fulfill sales quotes or otherwise advance the interests of Wells Fargo or its employees and increase sources of profitability while simultaneously burdening customers with financial products they did not authorize, need and/or even know about," the suit claimed.
What all that mean, the lawsuit alleged, was that Wells Fargo's stock was trading at "artificially inflated prices.”
The suit had been brought on behalf of investors who bought Wells Fargo's stock between Feb. 26, 2014, and Sept. 15, 2016, one week after the bank reported its $185-million settlement with a number of regulators and which caused the stock's drop in value. The court-appointed lead plaintiff in the case was Union Investment, a European asset-management firm, according to the Los Angeles Times.
Wells Fargo denied the allegations, but said it had "entered into the agreement in principle to avoid the cost and disruption of further litigation."
Wells Fargo continues to face other lawsuits and, as CUToday.info reported, it was hit in April with a $1-billion penalty for a different set of abuses, in this case for harming mortgage and auto-loan borrowers and for what regulators said was a pervasive and "reckless" lack of risk management.
Earlier this year, the Federal Reserve took the highly unusual step of ordering the bank to cap its growth while it worked to improve its corporate governance.
The fines are not putting a significant dent in the bank’s profitability. Wells Fargo reported a $22.2-billion profit for 2017, and said profits were $5.9-billion in the first quarter of this year (prior to its $1 billion fine).