Gary Hefler et al. v. Wells Fargo & Company et al

Court: United States District Court of the Northern District of California
Case Number: 3:16-cv-05479
Judge: Hon. Jon S. Tigar
Class Period: 02/26/2014 - 09/20/2016
Case Contacts: Salvatore J. Graziano, Adam H. Wierzbowski, Rebecca E. Boon, Michael Mathai

This action asserts claims pursuant to Sections 10(b), 20A, and 20(a) of the Securities Exchange Act of 1934 against defendants Wells Fargo & Company (“Wells Fargo” or the “Company”) and several of its most senior current and former executives and Board members (collectively with Wells Fargo, the “Defendants”) seeking to recover for their fraudulent course of conduct, in connection with the Company’s scandal of creating fake or unauthorized client accounts in order to hit lucrative performance goals and enrich Defendants, that artificially inflated the price of the Company’s common stock from February 26, 2014 through September 20, 2016 (the “Class Period”).

Wells Fargo is the world’s second largest bank by market capitalization, with $1.9 trillion in assets and $1.2 trillion in deposits.  It is a diversified financial services company that provides retail, commercial, and corporate banking services, principally in the United States, to over 70 million customers.  The action alleges that, throughout the Class Period, and despite the existence of the undisclosed fake account fraud, Wells Fargo and its senior officers made a series of materially misleading statements and omissions about its values, strategies, and results concerning “cross-selling”—the practice of selling multiple services to a single customer of the Company.

Specifically, throughout the Class Period, Wells Fargo falsely touted the Company’s cross-selling practices by repeatedly representing that its culture was focused around giving customers services that they valued and needed and that its efforts were highly successful and a key driver of strong financial results.  However, after years of maintaining these assurances, various regulators and Wells Fargo suddenly revealed on September 8, 2016 that several regulatory investigations had culminated in findings that Wells Fargo employees secretly and illegally had been opening millions of unauthorized accounts for existing Wells Fargo customers in order to hit performance targets.  Additional disclosures concerning the widespread fraud continued throughout the next two weeks, including admissions by then-CEO John Stumpf in congressional testimony that the Company’s highest executives, including himself and the Board, knew about the fake account fraud on a “significant scale” by 2013.  As a result of these unexpected disclosures, the price of the Company’s stock plummeted, causing substantial investor losses.

On January 5, 2017, the Honorable Jon S. Tigar of the Northern District of California appointed Union Asset Management Holding AG as Lead Plaintiff, and on May 27, 2017 appointed Bernstein Litowitz Berger & Grossmann LLP as Lead Counsel.  Motion to dismiss briefing was completed on September 25, 2017.  On February 27, 2018, the Court issued an opinion upholding the Plaintiff’s complaint and refusing to dismiss the bulk of the allegations against the bank and its former and current executives. 

On May 4, 2018, the parties announced that they had reached a settlement-in-principle of $480 million in cash to resolve the case. The Settlement, which remains subject to court approval and ongoing diligence discovery, represents the fourth largest securities settlement ever achieved in the Ninth Circuit, and the 31st largest securities settlement ever in the United States.

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