Wells Fargo reached a record settlement today with U.S. shareholders after employees created over 1.5 million false accounts and insurance policies under customer’s names. Twenty Wells Fargo executives and directors will pay for the damages, but the government and consumers’ faith has been shaken.
What is the status of this case?
This settlement is separate but related to other scandals and lawsuits within Wells Fargo. This case covers their breach of fiduciary duty. Allegations against them claimed that officials were aware the fraud was going on and turned a blind eye to the illegal activity.
This was a serious breach in their customers’ trust and highly illegal activity. Officials had a responsibility to stop this activity, track down these accounts and notify the victims. They did not. Now, those officials must pay insurers and the company back.
Wells Fargo spokespeople declined to comment to reporters but have previously denied widespread company guilt. Instead, they have blamed individuals and poor sales practices. Several wells Fargo top officials stepped down or were fired in the wake of the scandal.
How large is this scandal?
Wells Fargo is handling many scandals at the moment. However, this scandal is particularly expensive with over $2 billion in fines. In 2016, they agreed to pay almost $190 million to settle some government claims. Wells Fargo officials made deals with the following federal and state agencies:
- Consumer Financial Protection Bureau $100 million
- Office of the Comptroller of the Currency $35 million
- Los Angeles city attorney $50 million
They have yet to answer to the U.S. Securities and Exchanges Commission, the Department of Justice and the Department of Labor. These agencies could bring criminal and civil charges against the responsible individuals as well as corporate officials.
Wells Fargo also paid individual states a total of $575 million ($400 million by 2018, $175 million in 2019) in claims settlements brought forth by attorneys general nationwide. Until defrauded investors, insurers, federal bodies and finally the individuals are compensated, the lawsuits are not likely to stop.
Devon A. Kinnard, Partner
339 Main Street