Wells Fargo has reached the second largest class-action settlement in the history of the U.S. banking industry, agreeing to pay $1 billion to settle claims that it misled shareholders over its progress in fixing regulatory problems.
The settlement is the latest fallout from Wells Fargo's past consumer abuse scandals, which in 2018 prompted the Federal Reserve to place an unprecedented asset cap on the bank.
The San Francisco bank, which was led until 2019 by then-CEO Tim Sloan, repeatedly misled investors about when the Fed would release it from the restrictions, a group of shareholders alleged.
On the night the asset cap was announced, Sloan said that Wells Fargo was on the "fast track" and could resolve the Fed's concerns that year. The $1.9 trillion asset cap is
The $1 billion settlement is the 17th largest class-action settlement in history — the biggest being a $7.2 billion deal with Enron Corp. Among settlements involving banks, it is rivaled only by a
The Employees' Retirement System of Rhode Island was among the investors who brought the lawsuit. "Wells Fargo betrayed the trust of Rhode Island pensioners and now is rightly facing consequences because of that," Rhode Island General Treasurer James A. Diossa said Tuesday in a news release.
Other shareholders that were part of the lawsuit include the Public Employees' Retirement System of Mississippi, and Handelsbanken Fonder AB, a Swedish bank.
A Wells Fargo spokesperson said the settlement agreement resolves a lawsuit "involving the company and several former executives and a director, who have not been with the company for several years." The bank did not admit the allegations as part of the settlement, which is pending court approval.
"While we disagree with the allegations in this case, we are pleased to have resolved this matter," the Wells spokesperson said.
Sloan, who's now at the private equity firm Fortress Investment Group, declined to comment.
The lawsuit cited several comments by Sloan and other former Wells Fargo executives, who gave what proved to be overly optimistic timelines for the removal of the asset cap — even as they knew regulators were not pleased with their progress.
The suit noted Sloan's comments at a March 2019 congressional hearing, where his signals that the bank was making progress quickly drew a
The $1 billion settlement adds "transparency and more truth-telling in the financial markets" by sending a message to corporate executives elsewhere, said John C. Browne, a partner at the law firm Bernstein Litowitz Berger & Grossmann, which represented investors alongside Cohen Milstein Sellers & Toll.
The settlement also indicates that Wells Fargo's current leadership is committed to "putting their past behind them and focusing on moving forward," Browne said.
In December, Wells Fargo reached a $3.7 billion
