Federal judge refuses to toss shareholder suit against Wells Fargo executives
A federal judge in San Francisco has refused to toss a shareholder lawsuit against executives and directors of Wells Fargo over sales pressures that led employees to open millions of unauthorized accounts for bank customers.
U.S. District Judge Jon Tigar ruled (PDF) on Wednesday, report Reuters and Bloomberg Quint.
The suit had claimed that the defendants knew or should have known about the practice of opening accounts without customer consent, but did not address the problem or disclose it to the public. Among the defendants are former chief executive John Stumpf, former retail banking chief Carrie Tolstedt and current CEO Tim Sloan.
Tigar dismissed insider trading claims based on California law against a few of the defendants, including Stumpf, Tolstedt and Sloan, but allowed the rest of the suit to proceed. Remaining claims include breach of fiduciary duty and violation of federal securities laws.
“Just as it is implausible that the director defendants were unaware of the account-creation scheme given the extent of the alleged fraud and the number of red flags, it is implausible that Wells Fargo’s senior management, involved in the day-to-day operations of the bank … wasn’t aware of the alleged fraud,” Tigar wrote.
The case is Wells Fargo & Co Shareholder Derivative Litigation.