Wells Fargo in talks to settle fake-account investigations
Wells Fargo is in talks with the Justice Department and the SEC about resolving the two-year investigations into the bank’s infamous fake-accounts scandal.
A potential settlement with government agencies would help Wells Fargo move a step closer toward turning the page on its deep legal troubles.
The “resolution” discussions with the DOJ and SEC are “preliminary and/or exploratory,” Wells Fargo said in a regulatory filing made public late Wednesday. Wells Fargo warned that there can be “no assurances” that the negotiations will be successful.
Wells Fargo also added $500 million to the war chest used to pay for its countless lawsuits. The bank raised the high end of potential losses linked to legal matters to $2.7 billion at the end of 2018. It cautioned the outcomes of legal actions are “unpredictable” and subject to considerable uncertainty.
Wells Fargo became a lightning rod for criticism when in September 2016 it admitted that workers opened millions of fake bank and credit card accounts to meet wildly unrealistic sales goals. The bank said it fired 5,300 employees over several years.
Even if it puts to bed the DOJ and SEC investigations, Wells Fargo still faces a litany of probes related to its sales tactics. The bank’s latest filing listed investigations from the Labor Department, various state attorneys general and state prosecutors.
“These matters are at varying stages,” Wells Fargo said.
Wells Fargo leaders reach $240 million settlement
Meanwhile, current and former Wells Fargo officials, including CEO Tim Sloan and his predecessor John Stumpf, reached a record-breaking preliminary settlement with shareholders, according to a court filing made public late Thursday.
Shareholders in the lawsuit alleged that Wells Fargo leaders “knew or consciously disregarded” the creation of millions of fake accounts and that the ensuing scandal “significantly damaged” the bank.
In a common practice, Wells Fargo executives and directors took out insurance policies to protect them from shareholder lawsuits. Under the terms of the settlement, insurers for 20 current and former Wells Fargo executives and directors would pay $240 million to shareholders.
The lawsuit claims that would be “by far” the largest insurer-funded cash recovery of any settlement in a shareholder derivative action. As part of the settlement, Wells Fargo would pay for the attorneys’ fees of the plaintiffs.
Beyond Stumpf and Sloan, other Wells Fargo leaders named as defendants in the lawsuit include chairwoman Elizabeth Duke, chief financial officer John Shrewsberry and former community banking boss Carrie Tolstedt.
The Wells Fargo settlement is still subject to approval from a judge in the US District Court in the Northern District of California.
Wells Fargo still in the penalty box
Wells Fargo said that it’s “unable to determine” whether the “ultimate resolution” of its fake-accounts scandal will have a “material adverse effect” on its financial condition.
Last year, Wells Fargo also said about 545 homeowners lost their homes due to an apparent software glitch with the bank’s loan modification process.
Over the past two years, Wells Fargo has taken many steps to try to move beyond its scandals, including replacing senior executives, revamping its board of directors and eliminating its controversial sales goals.
But Wells Fargo still remains in the penalty box with regulators. The Federal Reserve has yet to remove the unprecedented asset cap it placed on Wells Fargo in early 2018 for “widespread consumer abuse.” And Senator Elizabeth Warren, a Democrat, continues to call for Sloan to be fired.