Wells Fargo has agreed to pay $145 million to resolve a government inquiry into the company's stock-related contributions to its employee retirement plans.
The Department of Labor said that the bank's 401(k) plan overpaid for preferred stock that was eventually deposited into employees' accounts. The San Francisco bank has disputed the agency's allegations, but it agreed to pay a $13.2 million penalty to the Labor Department, plus $131.8 million to plan participants, to settle the issue.
The Labor Department's investigation, which covered 2013 to 2018, found that the bank paid between $1,033 and $1,090 per share for preferred stock. The preferred shares then turned into $1,000 in Wells Fargo common stock for plan participants.
"Our investigation found those responsible for Wells Fargo's 401(k) plan paid more than fair market value for employer stock and, by doing so, betrayed the trust of the plan's current and future retirees," Secretary of Labor Marty Walsh said in a press release.
In a statement, Wells Fargo said it "strongly disagrees" with the allegations and "believes it followed applicable laws in conducting the transactions."
"Though the Company disagrees with the DOL's allegations and has not conducted these transactions since 2018, Wells Fargo believes resolving this legacy matter is in the best interest of the Company," the bank's statement said.
Wells Fargo also said that all 401(k) plan participants received "all matching and profit-sharing contributions due to them" and that an independent third party confirmed that the plan did not pay more than the fair market value of the stock.
The bank and the plan trustee, GreatBanc Trust Co., agreed to the settlement without admitting or denying the agency's allegations.
The Labor Department said Wells Fargo lent money to the 401(k) plan to buy the preferred stock, and that the $1.9 trillion-asset bank used the dividends on those shares to defray the cost of its 401(k) contributions and pay back the loans.
Like other mortgage lenders, the San Francisco megabank has been cutting staff since refinancing volumes started to fall. Additional layoffs are expected over the next couple of quarters, according to the bank’s chief financial officer.
The agency said GreatBanc will no longer act as a trustee to a public company in any "future leveraged transaction involving an employee stock ownership plan, unless the plan acquires only publicly traded stock and pays no more than the fair market value."
In a separate statement, GreatBanc said that the Labor Department did not sue the Lisle, Illinois-based trustee, and noted that it is not "paying any money pursuant to the settlement."
"GreatBanc is proud of the process it followed in conducting these transactions over the years and it is proud of the retirement benefits that these transactions provided to Wells Fargo 401(k) Plan participants," said GreatBanc President and CEO James Staruck.
