The fund provider Union Investment, has received $480m in damages from shareholders in a settlement lawsuit against Wells Fargo. The settlement amount is well above the amount that would have been expected if the court proceedings continued. At the same time, the total sum is ranked 31st in the compensation claims ever made in the United States.
“As an asset manager and trustee of the funds entrusted to us, we generally pursue long-term and sustainable investment goals – not least because of our sustainability strategy as an active shareholder in order to sanction investor-malfunctioning misconduct, such as that of Wells Fargo”, said Andreas Zubrod, board member of Union Investment.
In US federal suit in California, Union Investment blamed Wells Fargo for having repeatedly made false statements, artificially inflating its share price from February 2014 to September 2016. According to the application, the false statements related to the secret opening of bank accounts in the name of Wells Fargo customers without their consent.
Finally, in September 2016, US authorities revealed that Wells Fargo employees were executing millions of clandestine covert accounts for customers in an effort to meet corporate goals, particularly ambitious cross-selling ratios. These metrics were critical to the financial stability and growth prospects of Wells Fargo from an investor perspective. When the scandal became known, Union Investment saw a significant decline in the price of the share and the resulting loss for investors.
Zubrod continued: “Opening fake accounts for customers and hiding them from the investors is simply unacceptable. Such behaviour undermines the confidence of market participants in the integrity of management. Against this background, we are very pleased with the comparison and see it as a crucial step for Wells Fargo to eliminate previous mistakes in corporate governance and now regain investor confidence through integrity.”
The $480m settlement will be borne by Wells Fargo beyond $185m in punitive damages already imposed by US regulators. “The comparison also underlines the need for class action lawsuits in the interest of effective enforcement beyond administrative enforcement”, said Zubrod.