On August 31, 2020, Cohen Milstein, representing the Public Employees’ Retirement System of Mississippi (“Mississippi”) and the State of Rhode Island, Office of the General Treasurer (“Rhode Island”) was appointed Co-Lead Counsel in a securities class action against Wells Fargo & Company. The case, In re Wells Fargo & Company Securities Litigation, No. 1:20-cv-04494-GHW, is currently pending in the U.S. District Court for the Southern District of New York before District Judge Gregory H. Woods.
In this case, Mississippi and Rhode Island and their Co-Lead Plaintiffs Handelsbanken Fonder AB and Louisiana Sheriffs’ Pension & Relief Fund allege that Wells Fargo and certain of its executives violated Sections 10(b) and 20(a) of the Exchange Act and U.S. Securities and Exchange Commission (“SEC”) Rule 10b-5 promulgated thereunder. Specifically, plaintiffs allege that, in the wake of a widespread banking scandal, Wells Fargo misrepresented that it had improved its governance and oversight structures to ensure that there would be no recurrence of the abuses of customer and shareholder trust that had plagued the Company and that the company was in compliance with government consent orders stemming from that scandal. Wells Fargo shareholders—including the Institutional Investors—incurred significant losses after the U.S. House of Representatives Financial Services Committee issued a report revealing that, in reality, Wells Fargo has “clearly demonstrated an unwillingness and inability to stop harming its customers” and that its remediation plans fell “woefully short” of regulators’ expectations.
Wells Fargo is a financial services company that provides retail, commercial, and corporate banking services. In September 2016, investors learned that Wells Fargo had engaged in widespread consumer abuses, including fraudulent bank account opening practices. Exposure of these practices drew intense regulatory scrutiny and resulted in the U.S. Department of Justice, SEC, and other federal and state authorities collectively levying billions of dollars in financial penalties on Wells Fargo. On February 2, 2018, the first day of the Class Period, the Company agreed to a Consent Order (“Federal Reserve Consent Order”) with the Federal Reserve System (“FRS”) to address the oversight failures of Wells Fargo’s Board of Directors that had facilitated widespread abuses and compliance breakdowns. That day, the Company announced its confidence in its ability to satisfy the Federal Reserve Consent Order’s requirements.
Soon after, on April 20, 2018, Wells Fargo entered into consent orders with the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency (together with the Federal Reserve Consent Order, the “Consent Orders”). The Consent Orders required payment of $1 billion in civil penalties and development of a comprehensive plan to identify and remediate present and future consumer harm.
Throughout the Class Period, Defendants repeatedly reassured investors that the Company was developing and implementing the required governance and risk management reforms, was aligned with regulators, and was making meaningful progress toward meeting its obligations under the Consent Orders. As a result of Defendants’ false and misleading statements and omissions, shares of Wells Fargo common stock traded at artificially inflated prices throughout the Class Period.
The truth began to be revealed on March 4, 2020, after the market closed, when the House Financial Services Committee released a 113-page report (the “House Report”) detailing its yearlong investigation into Wells Fargo and concluding that Wells Fargo was not in compliance with the Consent Orders and was unwilling to take the steps necessary to satisfy its obligations. The House Report described Wells Fargo’s risk management plans as “materially incomplete” and “woefully short” of the FRS’s expectations, and the House Report revealed that in March 2019, the FRS had sent Wells Fargo a letter stating that the Company’s remediation plans “remain materially incomplete” and were “riddled with errors and discrepancies.” On this news, Wells Fargo shares declined from $41.40 per share on March 4, 2020 to $38.90 on March 5, 2020, on heavy trading volume.
Then, on March 10, 2020, Defendant Scharf testified before the House Financial Services Committee and finally acknowledged that Wells Fargo “ha[s] not yet done what is necessary to address [its] shortcomings” and that “the [C]ompany’s leadership failed its stakeholders” and “we did not have the appropriate controls in place across the [C]ompany.” Additionally, that day, House Financial Services Committee Chairwoman Maxine Waters requested that the DOJ review 2019 testimony by Defendant Sloan to investigate whether he had lied to Congress in violation of federal laws. As a result of these disclosures, Wells Fargo shares declined from $35.08 per share on March 10, 2020 to $32.33 on March 11, 2020 and then down to $27.20 on March 12, 2020 on heavy trading volume.
As a result of Defendants’ false and misleading statements, and the precipitous decline in the value of Wells Fargo common stock as the truth was revealed, the Institutional Investors and other Class members suffered significant losses and damages.
The original case was named: Adam Perry v. Wells Fargo & Company, et al., Case No. 1:20-cv-04494, United States District Court, Southern District of New York
The case is named: In re Wells Fargo & Company Securities Litigation, Case No. 1:20-cv-04494-GHW, United States District Court, Southern District of New York