Wells Fargo announced late last week that it has agreed to pay $480 million to settle a securities fraud class-action suit.
In a press release, the embattled bank said the lawsuit was filed in the U.S. District Court for the Northern District of California, sparked by misstatements and omissions in its discourse related to sales practices. The $480 million fine is subject to a final approval by the court.
Wells Fargo has denied the claims and allegations in the action, and entered into the settlement to avoid the costs and disruption of further lawsuits. “We are pleased to reach this agreement in principle and believe that moving to put this case behind us is in the best interest of our team members, customers, investors and other stakeholders,” said CEO Tim Sloan in the release. “We are making strong progress in our work to rebuild trust, and this represents another step forward.”
As Wells Fargo is settling this case, the hits keep coming to the national bank. Most recently, the Department of Labor is determining whether Wells Fargo pushed retirement-planning customers into pricier accounts and toward buying more expensive investment funds in order to generate more fees for itself. As The Wall Street Journal reported, the bank has pressed employees to move clients into more expensive individual retirement accounts (IRAs) when they retired or left jobs that provided them with 401(k) accounts. Once moved into an IRA, Wells Fargo would incentivize employees to get clients to invest those assets into Wells Fargo mutual funds or funds carrying a front-end load, meaning fees were immediately paid to the bank from customer assets.
Under the Employee Retirement Income Security Act (ERISA), entities that serve these accounts, including Wells Fargo, are supposed to put client interests ahead of their own. A whistleblower has come forward to cooperate with the Labor Department, alleging that the bank has violated its ERISA responsibilities.
Wells Fargo handles 401(k) accounts for large employers, including Cardinal Health and Lowe’s Companies.