According to a report by Bloomberg, Wells Fargo & Co. has received federal approval for a $1 billion settlement in a shareholder lawsuit concerning unauthorized customer accounts. However, U.S. District Judge Jennifer L. Rochon greenlit the settlement after a hearing in New York, bringing the bank’s total payouts for the scandal to nearly $5 billion. The lawsuit, filed in 2020, accused former CEO Tim Sloan and other executives of misleading investors and the public about the bank’s regulatory interactions following a 2016 scandal.
The settlement ranks among the six largest securities class-action settlements of the past decade and the 17th largest of all time. Proceeds from the settlement will benefit investors who purchased Wells Fargo stock between February 2, 2018, and March 12, 2020. This comes after Wells Fargo had already agreed to pay $800 million in two separate lawsuits and $3 billion to resolve U.S. investigations into the scandal.
Criminal charges and penalties for former executive
Carrie L. Tolstedt, the former head of retail banking at Wells Fargo, is the only executive criminally charged in relation to the scandal, Cryptopolitan reported. Prosecutors have recommended a one-year prison sentence for Tolstedt for obstructing an investigation into the bank’s notorious fake accounts scandal. Tolstedt had pleaded guilty in May and agreed to a ban from the banking industry and a $17 million penalty. Her sentencing is scheduled for September 15.
Between 2002 and 2016, Wells Fargo employees opened approximately two million unauthorized deposit and credit card accounts, leading to $3 billion in penalties and a tarnished reputation for the bank. Tolstedt was accused of hindering the Office of the Comptroller of the Currency’s examination by failing to disclose crucial statistics and information. Federal prosecutors argued that a lenient sentence would not reflect the gravity
of her actions and emphasized the need for severe consequences to deter future corporate misconduct. Tolstedt’s legal team has yet to respond to the prosecutors’ recommendation but will have an opportunity to present their case at the upcoming sentencing hearing.
Wells Fargo’s path to redemption
Since the scandal broke, Wells Fargo has undergone significant changes, including reforming its compensation practices and replacing its chief executive twice. The latest CEO, Charlie Scharf, has indicated plans for substantial changes to regain the trust of regulators and the public. The bank’s efforts to resolve the scandal and make amends have been extensive, but the recent settlement and pending sentencing of Tolstedt serve as reminders of the long road ahead for full corporate rehabilitation.
In summary, the approval of Wells Fargo’s $1 billion settlement marks a significant chapter in the bank’s ongoing efforts to resolve one of the most significant banking scandals in modern history. The settlement will benefit a class of shareholders and adds to the bank’s growing list of financial penalties related to the scandal. Meanwhile, the criminal charges against former executive Carrie L. Tolstedt highlight the personal accountability that can come with corporate malfeasance. As Wells Fargo continues its path to redemption, these developments serve as cautionary tales for the banking industry at large, emphasizing the high stakes involved in corporate governance and regulatory compliance.
