Wells Fargo & Co, an American financial services firm, has agreed to pay shareholders $1 billion as it aims to settle a class-action lawsuit related to the company’s 2016 unauthorized accounts scandal.
The shareholders accused the financial services company of not changing its management and practices fast enough after a series of scandals over its treatment of customers.
The preliminary settlement has been submitted to a federal judge in Manhattan to be approved in the next few months, according to the Wall Street Journal report.
In June 2020, Sweden-based Handelsbanken Fonder AB and the Louisiana Sheriffs’ Pension & Relief Fund and a group of shareholders, filed a class action against Wells Fargo & Co involving its former executives and a director.
The lawsuit accused the San Francisco-based bank of shortcomings in strengthening its risk control and compliance following commitments made to the Federal Reserve and two other financial regulators in 2018.
The US banking regulator had forced the bank to submit a plan to take control of the management, along with a temporary asset cap following a series of compliance problems.
Shareholders accused the bank of overstating its progress in clearing the issues. The fourth-largest US bank lost over $54 billion in two years ending March 2020.
In 2020, the company agreed to pay $3 billion to settle an investigation in connection with more than a decade of widespread consumer abuses. The US investigation agency found that Wells Fargo’s overwhelming sales targets led employees to open millions of fake accounts for customers and force other products on them from 2002 to 2016, often by misappropriating their identities or creating false records, the Department of Justice said.
In addition, lapses were found across business lines including mortgages and auto lending.
Since 2016, Wells Fargo has paid or reserved several billion dollars to resolve regulatory investigations and litigations.
According to a Reuters report, Wells Fargo denied wrongdoing and settled to eliminate the burden and expenses of litigation. Lawyers for the plaintiffs may demand up to 19% of the settlement fund for legal fees.
