NEW YORK (Reuters) – Wells Fargo & Co (WFC.N) has agreed to pay $1 billion to settle a lawsuit accusing it of defrauding shareholders over its progress in recovering from a series of scandals over its treatment of customers.
A preliminary settlement of the proposed class action lawsuit was filed late Monday night in federal court in Manhattan, and requires judge approval. Court papers showed that the dollar amount was suggested by a broker.
Wells Fargo has been operating since 2018 under approval orders from the Federal Reserve and two other financial regulators that require improved governance and oversight.
The fourth-largest US bank is also subject to an asset cap by the Federal Reserve, which could hinder its ability to compete with larger rivals JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N) and Citigroup Inc (CN).
Shareholders have accused Wells Fargo of exaggerating how well it complied with those orders, and said the bank’s market value fell by more than $54 billion over the two years ending in March 2020 as the shortcomings became known.
Court papers showed that the San Francisco-based bank denied any wrongdoing, settling to shed the burden and cost of litigation.
“While we disagree with the allegations in this case, we are pleased to have resolved this matter,” Wells Fargo said in a statement on Tuesday.
Plaintiffs’ attorneys can claim up to 19% of the settlement fund for legal fees.
Wells Fargo since 2016 has paid or committed several billion dollars to resolve regulatory investigations and litigation regarding its business practices.
These practices included opening about 3.5 million accounts without the customer’s permission, and charging hundreds of thousands of borrowers for car insurance they didn’t need.
Overhauling the 171-year-old bank founded by Henry Wells and William Fargo has taken longer than expected when he took over in 2019, CEO Charlie Scharf said.
“When I arrived,” he said in his letter, “we did not have the culture, the effective processes, or the proper management oversight to address weaknesses in a timely manner.” March 3 Letter to Shareholders. “Today, we approach these issues differently.”
The case is in Wells Fargo & Co Securities Litigation, US District Court, Southern District of New York, No. 20-04494.
(Reporting by Jonathan Stempel) in New York. Editing by Simon Cameron Moore
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