Wells Fargo has agreed to pay $1 billion to settle a class action lawsuit for overstating its progress following the bank’s fake accounts scandal. File photo by Larry W. Smith/EPA-EFE/
May 16 (UPI) -- Wells Fargo has agreed to pay $1 billion to settle a class action lawsuit for overstating its progress following the bank's fake accounts scandal nearly a decade ago.
The preliminary settlement detailed in court documents late Monday, compensates the bank's shareholders -- who purchased Wells Fargo stock between Feb. 2, 2018, and March 12, 2020 -- for its handling of the 2016 fake accounts scandal.
The shareholders involved in the lawsuit, which was filed in 2020, include Swedish investment firm Handelsbanken Fonder, along with pension funds in Louisiana, Mississippi and Rhode Island.
The plaintiffs claim Wells Fargo executives misled investors by saying regulators were satisfied with the bank's progress under federal consent orders. But a House Financial Services Committee report in March of 2020 found that Wells Fargo was not in compliance, causing its shares to drop.
According to the court filing, the settlement to compensate defrauded shareholders is expected to be one of the largest class action settlements in history, once it is approved by a federal judge in New York.
"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 Toll, managing partner at Cohen Milstein Sellers & Toll, said in a statement.
This week's $1 billion settlement comes three years after Wells Fargo agreed to pay $3 billion to resolve allegations that the bank pressured employees to meet unrealistic sales goals, which led to the creation of thousands of fake customer accounts that collected millions of dollars in unlawful fees and interest.
Wells Fargo employees created the accounts to boost sales figures and earn bonuses as part of the bank's "Going for gr-eight" campaign that encouraged customers to open eight accounts.
The U.S. Attorney's Office in the Central District of California also accused the bank of illegally using customers' personal information and hurting their credit ratings.
After Wells Fargo was sued in 2015 for illegal sales tactics, the bank ended its sales goals and fired more than 5,000 workers.
In a response to this week's settlement, Wells Fargo said it was "pleased to have resolved this matter."
"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," Wells Fargo spokesperson Sunny Rodriguez said in a statement to USA Today.
"While we disagree with the allegations in this case, we are pleased to have resolved this matter."