September 30, 2021
A federal judge on Thursday rejected Wells Fargo & Co’s (WFC.N) bid to dismiss a lawsuit claiming it defrauded shareholders about its ability to rebound from five years of scandals over its treatment of customers.
The fourth-largest U.S. bank has operated since 2018 under consent orders from the Federal Reserve and two other U.S. financial regulators to improve governance and oversight, with the Fed also capping Wells Fargo’s assets.
Shareholders said bank officials falsely claimed in TV interviews, analyst calls and congressional testimony that the bank was mending its ways, when regulators actually viewed its progress as “deficient” and “unacceptable.”
U.S. District Judge Gregory Woods in Manhattan said the shareholders plausibly alleged that some statements by various bank officials, including former Chief Executive Tim Sloan, were “deliberately or recklessly false or misleading.”
According to shareholders, San Francisco-based Wells Fargo lost more than $54 billion of market value as the truth was gradually revealed over a two-year period ending in March 2020.
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The shareholders are led by the state of Rhode Island, and pension funds in Louisiana, Mississippi and Sweden.
Their lawyer Steven Toll said he was pleased they can sue over the “vast majority of the alleged fraudulent statements.”