(Reuters) – Wells Fargo & Co has agreed to pay $1 billion to settle a lawsuit accusing the company of lying to shareholders about its progress in recovering from a series of scandals over its treatment of customers.
U.S. District Judge Gregory Woods in Manhattan federal court on Tuesday granted preliminary approval of the cash settlement, which had been filed the night before.
The dollar amount had been suggested by a mediator. Judge Woods scheduled a hearing for September 8 to consider final approval.
Wells Fargo has been operating since 2018 under consent orders from the Federal Reserve and two other financial regulators requiring it to improve governance and oversight.
The fourth-largest U.S. bank is also subject to an asset cap by the Fed, limiting its growth and its ability to compete with larger rivals JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc.
Shareholders accused Wells Fargo of exaggerating how well it complied with those orders, saying the bank̵
7;s market value fell by more than $54 billion in two years ending in March 2020 when the deficiencies became known.The San Francisco-based bank denied wrongdoing and moved to eliminate the burden and expense of litigation, court papers show.
“While we disagree with the allegations in this case, we are pleased to have resolved this matter,” Wells Fargo said in a statement.
Attorneys for plaintiffs can seek up to 19% of the settlement fund for attorneys’ fees.
Since 2016, Wells Fargo has paid or set aside billions of dollars to settle regulatory investigations and litigation over its business practices.
Those practices included opening about 3.5 million accounts without the customer’s permission and charging hundreds of thousands of borrowers for auto insurance they didn’t need.
CEO Charlie Scharf has said that repairing the 171-year-old bank founded by Henry Wells and William Fargo has taken longer than he expected when he took over in 2019.
“When I arrived, we did not have the culture, effective processes or appropriate management oversight in place to address weaknesses in a timely manner,” he said in his March 3 letter to shareholders. “Today we take these questions in different ways.”
The case is In re Wells Fargo & Co Securities Litigation, US District Court, Southern District of New York, No. 20-04494.
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