Wells Fargo $1 billion accord over fake accounts approved

Wells Fargo has agreed to pay nearly $5 billion — including the $1 billion settlement of a securities class action lawsuit — to resolve various claims related to its phony-accounts scandal.

Michael Nagle/Bloomberg

Wells Fargo’s $1 billion settlement of a shareholder lawsuit over unauthorized customer accounts was approved by a federal judge, bringing the total amount the bank has agreed to pay to resolve claims over the scandal to nearly $5 billion.

U.S. District Judge Jennifer L. Rochon authorized the agreement following a hearing in New York Friday, more than three months after the deal was reached, lawyers for investors said in a statement. The approval couldn’t be immediately confirmed in court records.

The deal resolves claims filed in 2020 alleging that former Chief Executive Officer Tim Sloan and other bank executives made misleading statements to investors, the media and Congress that presented an overly optimistic picture of the company’s interactions with regulators after a 2016 scandal over the accounts.

Wells Fargo declined to comment on the approval. After the deal was reached in May, the bank said that it resolved a case involving several former executives and a director who had not been with the company for several years. 

Plaintiffs’ lawyers said the agreement is one of the six largest securities class-action settlements of the past decade and the 17th largest of all time. 

The proceeds of the settlement will go to investors who bought Wells Fargo stock from Feb. 2, 2018, through March 12, 2020. Wells Fargo previously agreed to pay $800 million to settle two lawsuits over the bogus accounts and $3 billion to resolve US investigations. 

Investigators found that the company set overly aggressive sales targets that led employees to open millions of fake accounts for customers to meet goals, often by creating false records or misappropriating their identities, generating millions of dollars in fees and interest and damaging some clients’ credit ratings, according to the Justice Department.  

U.S. prosecutors said earlier this month that the company’s former head of retail banking, Carrie L. Tolstedt, the only executive charged with criminal wrongdoing, should spend a year in prison for impeding their probe. 

Tolstedt pleaded guilty in May and agreed to a ban on working in the banking industry and to pay a $17 million penalty. She’s scheduled to be sentenced Sept. 15.

The case is In Re: Wells Fargo & Co. Securities Litigation, 20-cv-4494, US District Court, Southern District of New York.

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