Wells Fargo Fake Accounts Settlements Nears $5 Billion Mark

Wells Fargo will pay $1 billion to settle an investor lawsuit tied to authorized customer accounts.

The settlement was approved Friday (Sept. 8) by U.S. District Judge Jennifer L. Rochon and brings the amount the banking giant has agreed to pay in connection with its “fake accounts” scandal to close to $5 billion, Bloomberg News reported. 

A spokesperson for Wells Fargo declined to comment beyond a statement the bank issued earlier this year:

“This agreement resolves a consolidated securities class action lawsuit involving the company and several former executives and a director, who have not been with the company for several years. While we disagree with the allegations in this case, we are pleased to have resolved this matter.”

Attorneys for the plaintiffs told Bloomberg the deal is among the six largest securities class-action settlements in the past decade and the 17th largest on record.

According to the report, the settlement stems from a 2020 suit that alleged former Wells Fargo CEO Tim Sloan and other executives misled investors, the media and Congress by painting a too-rosy picture of Wells Fargo’s dealings with regulators in the scandal.

Federal authorities found that Wells Fargo’s aggressive sales goals led employees to open millions of fake accounts for customers to meet their targets. In many cases, they did this by creating false records or misappropriating customer identities, generating millions of dollars in fees and harming some customers’ credit ratings.

According to the Bloomberg report, the $ 1 billion settlement proceeds will go to investors who purchased Wells Fargo stock from Feb. 2, 2018, through March 12, 2020. The bank has also agreed to pay $800 million to settle two lawsuits over the bogus accounts and $3 billion to resolve investigations by U.S. regulators.

Criminal proceedings in the case are still ongoing. Carrie Tolstedt, Wells Fargo’s former retail banking head, is still awaiting sentencing after agreeing to plead guilty earlier this year to obstructing the investigation into account opening practices.

Prosecutors are asking for her to spend a year in prison, arguing in court that she tried to hide one of the biggest banking scandals in modern history from regulators.

“Corporate wrongdoers must be sent a clear message that maintaining a lucrative position through criminal behavior is not worth the risk,” they wrote.

A report from Bloomberg News noted that the prosecution’s argument goes against a recommendation by the U.S. Probation Office for Tolstedt to spend three years on probation.

Meanwhile, consumers — at least the ones who own small and mid-sized businesses (SMBs) — continue to trust big banks like Wells Fargo.

Research by PYMNTS and Enigma finds that one-third of SMBs prefer large, national banks for their financial needs over any other type of lender.

“For example, large national banks like Bank of America, Wells Fargo and JPMorgan are particularly favored by construction firms, with 39% considering them for credit lines,” PYMNTS wrote last week.

“Similarly, about 34% of small businesses in the professional services sector look to large lenders for their credit needs, as do nearly 32% of those in the retail trade and hospitality space.”