Treasurer Diossa Announces Employees’ Retirement System of Rhode Island Reaches Historic $1 Billion Settlement with Wells Fargo in Securities Fraud Class Action

Published on Tuesday, May 16, 2023

Employees’ Retirement System of Rhode Island Successfully Settled Action Against Wells Fargo Alleging the Bank Misled Investors About Its Compliance with Federal Consent Orders and Likelihood Its Asset Cap Would be Lifted

Providence, RI – Today, Rhode Island General Treasurer James A. Diossa announced that the Employees’ Retirement System of Rhode Island (ERSRI) has reached a landmark $1 billion settlement in a securities fraud class action against Wells Fargo (NYSE: WFC). The case alleged that the Bank and its top executives made false and misleading statements to Congress and the public regarding issues of top concern to its investors: its compliance with consent orders imposed by the federal government after the Bank’s 2016 consumer scandal involving opening unauthorized customer accounts, as well as the timing of removal of the asset cap that limited the Bank’s growth.

“Wells Fargo betrayed the trust of Rhode Island pensioners and is now rightly facing consequences because of that. I am proud that ERSRI stood up for its stakeholders and held Wells Fargo accountable for its misconduct, and that we achieved this historic settlement,” said General Treasurer Diossa.

In 2018, Wells Fargo entered into consent orders with the Federal Reserve Board, Office of the Comptroller of the Currency, and Consumer Financial Protection Bureau to rectify governance and oversight failures that had allowed systemic fraudulent practices to occur at the Bank, including opening millions of unauthorized bank accounts and charging hundreds of thousands of borrowers for unnecessary insurance. Additionally, the Federal Reserve Board issued an unprecedented asset cap prohibiting Wells Fargo from expanding its assets until it had fully complied with the consent order.

Following entry into the consent orders, plaintiffs allege that Wells Fargo’s senior executives repeatedly told investors that regulators were satisfied with the Bank’s progress in satisfying the consent orders and that the asset cap would be timely removed. In fact, the federal regulators repeatedly rejected the Bank’s plans. As a result of the Bank’s alleged false and misleading statements and omissions, shares of Wells Fargo common stock traded at artificially inflated prices, causing investors to pay more for the stock than it was worth.

The truth was revealed in March of 2020, following a confidential year-long investigation by the House Financial Services Committee (HFSC). Both the Democratic majority and Republican minority of the HFSC released lengthy reports concluding that Wells Fargo was not in compliance with the consent orders and had not taken the steps necessary to satisfy its obligations. As the market learned of Wells Fargo’s alleged fraud, the stock price plummeted.

ERSRI is a court-appointed Co-Lead plaintiff in this action, along with the Public Employees’ Retirement System of Mississippi and Handelsbanken Fonder AB.

Defendants in this action were Wells Fargo, former CEO Timothy J. Sloan, former CFO and Senior Executive Vice President John R. Shrewsberry, former Senior Executive Vice President and General Counsel C. Allen Parker, and former Director of Wells Fargo and Wells Fargo Board Chairwoman Elizabeth “Betsy” Duke.

The settlement is subject to approval by the court. The litigation is pending in the Southern District of New York, and is styled as In re Wells Fargo & Company Securities Litigation, Case No. 1:20-cv-04494-GHW.