Wells Fargo Settles Securities Fraud Class Action for $480 Million--Update

By Emily Glazer 

Wells Fargo & Co. said Friday it reached a $480 million preliminary settlement agreement in a securities fraud class-action suit.

The settlement comes at a difficult time for Wells Fargo, which is dealing with multiple investigations and settlements. The problems kicked off in September 2016 when its sales-practices scandal erupted, and the bank later disclosed it opened up to 3.5 million sham retail banking customer accounts.

Wells Fargo said the amount was fully accrued for as of March 31.

Last month, Wells Fargo settled with two of its key regulators for $1 billion over its failure to manage risk, particularly in its auto-lending and mortgage businesses. That caused it to adjust its first-quarter earnings down $800 million. And in February the Federal Reserve capped the bank's assets in an unprecedented enforcement action, also relating to its inability to manage risk.

The $480 million settlement is to resolve a class-action in federal court in the Northern District of California. It is subject to final approval by the court.

Union Investment, a European asset-management firm and the court-appointed lead plaintiff in the lawsuit, alleged that Wells Fargo and certain current and former officers and directors of the bank made false statements and "artificially inflated" Wells Fargo's stock price from February 2014 through September 2016.

The bank said Friday that it "denies the claims and allegations in the action and entered into the agreement in principle to avoid the cost and disruption of further litigation."

Wells Fargo CEO Timothy Sloan said in the statement that the San Francisco-based bank believes "that moving to put this case behind us is in the best interest of our team members, customers, investors and other stakeholders."

Union executive board member Dr. Andreas Zubrod released a statement saying: "We take action to rectify misconduct that raises significant public policy concerns and severely harms public stock market investors."

Write to Emily Glazer at [e-mail]

(END) Dow Jones Newswires

May 04, 2018 17:50 ET (21:50 GMT)

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