Wells Fargo’s (NYSE:WFC) O & D’s Must Face Shareholder Suit
A federal judge said current and former Wells Fargo & Co. (NYSE:WFC) O & D’s (officers and directors), including CEO Tim Sloan, must face nearly all of a lawsuit by shareholders seeking to hold them personally liable for sales abuses and the creations of millions of unauthorized accounts.
US District Judge Jon Tigar in San Francisco said shareholders may pursue claims that Wells Fargo officials looked the other way as employees facing “unrelenting” pressure to meet sales quotas unlawfully opened accounts, and misled the public about fraudulent practices at the nation’s third-largest bank.
“Where, as here, plaintiffs’ claims arise from a pervasive and undisputed fraud going to the core of the company’s business, it is reasonable to infer senior executives knew about, or at least recklessly turned a blind eye to, the stream of red flags,” Tigar wrote in a decision dated Wednesday.
The judge also said that in the “unlikely” event Mr. Sloan did not know about the suspect practices before Y 2013, when he was the bank’s CFO, he was “certainly aware of these issues” by December 2013 when he said publicly, “I’m not aware of any overbearing sales culture.”
Wells Fargo spokesman Peter Gilchrist said in an e-Mail that the bank was taking “decisive steps” to rebuild trust, including from employees and shareholders. “We will continue to advocate strongly for our positions before the courts,” he added.
Lawyers for the plaintiffs did not immediately respond to requests for comment.
The shareholder derivative lawsuit seeks to force officers and directors, or their insurers to reimburse Wells Fargo for losses caused by their alleged poor oversight and misleading statements, as well as governance changes.
Wells Fargo since September 2016 has been rocked by scandals, including the San Francisco-based bank’s creation of as many as 3.5-M unauthorized accounts.
Many lawsuits have been filed, including on behalf of customers, and several top officials including onetime CEO John Stumpf and retail banking chief Carrie Tolstedt have left the bank, they are both defendants in the derivative lawsuit.
Senator Elizabeth Warren, a Massachusetts Democrat, called for Sloan to be fired.
The case is In re: Wells Fargo & Co Shareholder Derivative Litigation, U.S. District Court, Northern District of California, No. 16-05541.
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