Wells Fargo Sued by Shareholders Over Cross-Selling ScandalBy
CEO accused of misleading investors about Tolstedt retirement
Investor seeks class action status for others over 2 1/2 years
Wells Fargo & Co. was accused of misleading shareholders about its opening of unauthorized accounts and blamed for a 9 percent drop in the bank’s stock price when details became public this month.
The San Francisco-based bank duped investors for years about its fraudulent practice of cross-selling financial products and misrepresented the success of its model, according to the complaint filed Monday in San Francisco federal court. The investor who sued seeks class-action status on behalf of all shareholders from Feb. 26, 2014, to Sept. 15, 2016.
Chief Executive Officer John Stumpf allegedly continued the deception when he announced in July that Carrie Tolstedt, the head of the company’s community banking unit, was retiring. Stumpf, Tolstedt and Chief Financial Officer John Shrewsberry are all named as defendants in the complaint.
“Stumpf concealed the fact that the company had made substantial findings of the unlawful activity and actual fraud in its community banking segment as part of its investigation, which not only exposed millions of customers to unlawful fees and potential identity theft, but put the company in the crosshairs of federal investigations,” shareholder Gary Hefler alleged in the complaint.
Authorities including the U.S. Consumer Financial Protection Bureau fined Wells Fargo $185 million on Sept. 8 for potentially opening about 2 million deposit and credit-card accounts without authorization. Last week, Senate Banking Committee members including Massachusetts Democrat Elizabeth Warren urged Stumpf to return compensation and resign.
Wells Fargo spokesman Oscar Suris declined to comment on the complaint.
Plaintiffs’ attorney Shawn Williams said by phone that the time period covered by the case could be extended if the bank’s actions result in further losses for shareholders.
Investors who sued the bank’s board last week claimed directors breached their fiduciary duty by failing to claw back Tolstedt’s retirement benefits. Customers have also filed suits for the accounts created without their authorization.
Former bank employees last week sued in Los Angeles state court over claims they were fired after refusing to participate in the bank’s misconduct. The same lawyers who filed that case brought a similar complaint Monday in federal court.
The shareholder case is Hefler v. Wells Fargo & Co., 3:16-cv-05479, U.S. District Court, Northern District of California (San Francisco).
— With assistance by Laura J Keller