(Reuters) – A federal judge on Thursday rejected Wells Fargo & Co's bid to dismiss a lawsuit, claiming it deceived shareholders about its ability to recover after five years of scandal over its treatment of customers.
The fourth-largest U.S. bank has operated since 2018 with the approval of the Federal Reserve and two other U.S. financial regulators to improve governance and supervision, with the Fed also limiting Wells Fargo's assets. conversations and congressional testimony that the bank was changing its ways, when the regulators actually considered its progress to be "deficient" and "unacceptable."
U.S. District Judge Gregory Woods of Manhattan said shareholders likely claimed that certain statements from various bank officials, including former CEO Tim Sloan, were "knowingly or recklessly false or misleading."
According to shareholders, San Francisco-based Wells Fargo lost more than $ 54 billion in market value as the truth was gradually revealed over a two-year period ending in March 2020.
Judge Woods also dismissed claims against current CEO Charles Scharf was not guilty of the contested claims.
The scandals caused Warren Buffett's Berkshire Hathaway Inc. to drop almost all of its 1
"We will continue to vigorously defend the disputes and strongly disagree with the allegations," Wells Fargo said in an email.
Sloan's attorneys did not immediately respond to a request for comment.
The decision is a setback for Wells Fargo's recovery from disclosures, including opening approximately 3.5 million accounts without customer licenses and charging hundreds of thousands of car insurance borrowers they did not need.
Wells Fargo has paid more than $ 5 billion in fines, and the Fed's $ 1.95 trillion in asset coverage limits the bank's growth.  Mr. Sloan resigned abruptly as CEO after 2-1 / 2 years in March 2019. A year later, Wells Fargo canceled a $ 15 million bonus for him.
In his 61-page decision, Judge Woods did not rule on whether bank officials intended to defraud shareholders.
But he said it would have been "almost impossible" for Sloan to be unaware of the regulators' criticism.
"Based on facts on the spot, Mr. Sloan knew or, more importantly, should have known that he misunderstood essential facts related to the company," wrote Judge Woods.
Their lawyer Steven Toll said he was pleased that they could agree on "the vast majority of the alleged fraudulent statements."