Wells Fargo Agrees to Pay $1 Billion to Settle Pension-Led Lawsuit

Wells Fargo has agreed to pay $1 billion to settle a pension fund-led lawsuit that accused the bank of defrauding shareholders by misleading them over the progress it was making to rectify a slew of scandals.

The Public Employees’ Retirement System of Mississippi, the Louisiana Sheriffs’ Pension & Relief Fund and the state of Rhode Island were among the lead plaintiffs in the lawsuit, filed in June 2020 in U.S. District Court for the Southern District of New York. The final approval hearing for the preliminary settlement is scheduled for September 8.

“Wells Fargo betrayed the trust of Rhode Island pensioners and is now rightly facing consequences because of that,” Rhode Island Treasurer James Diossa said in a statement.

The lawsuit centered on Wells Fargo’s failure to adequately reform its processes in the aftermath of widespread consumer abuses it committed that came to light in September 2016, including fraudulent bank account opening practices. Those led to the U.S. Department of Justice, the Securities and Exchange Commission and other federal and state authorities imposing billions of dollars in penalties.

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In February 2018, Wells Fargo agreed to a consent order with the Federal Reserve System to address its board’s oversight failures that had facilitated the abuses and breakdown in compliance. In April 2018, Wells Fargo agreed to consent orders with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency that required Wells Fargo to pay $1 billion in civil penalties and develop a comprehensive plan to identify and remediate present and future consumer harm.

During the class period, which began on February 2, 2018, and ended on March 12, 2020, Wells Fargo “repeatedly reassured investors” that it was developing and implementing the required governance and risk management reforms, was aligned with regulators and was making “meaningful progress toward meeting its obligations under the consent orders,” stated the June 2020 complaint, which claimed this led Wells Fargo’s stock to trade at artificially inflated prices.

The complaint cited a 113-page report released by the U.S. House Committee on Financial Services in 2020 detailing a year-long investigation that concluded that Wells Fargo was not in compliance with the consent orders and was unwilling to take the steps necessary to meet its obligations. According to the complaint, the report described Wells Fargo’s risk management plans as “materially incomplete” and “woefully short” of the Federal Reserve System’s expectations.

Under the preliminary settlement, Wells Fargo denies the claims in the complaint and denies that the settlement class was harmed or suffered any damages as a result of the alleged conduct. The bank agreed to the settlement “solely to eliminate the burden and expense of continued litigation” and on the condition that it may not be construed as an admission of wrongdoing.

The proposed settlement class includes “all persons or entities who purchased or otherwise acquired the common stock of Wells Fargo” during the class period, excluding the defendants, Wells Fargo officers and directors and their family members.

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Tags: Lawsuits, Louisiana Sheriffs’ Pension & Relief Fund, Mississippi Public Employees’ Retirement System (PERS), Settlement, State of Rhode Island, Wells Fargo

Now is gold’s time to shine—as an investment. The yellow metal, a favorite refuge asset, has vaulted ever higher this year amid such global anxieties as inflation and the U.S. debt-ceiling crisis.

At $1,981 per ounce, as of Friday, gold is near its recent nominal record level, $2,299, set in mid-2020 during the pandemic’s onset. (Adjusted for inflation, the record was set in 1980.)

The question remains, though, about how long this zest for the glittering metal will persist. After all, gold is a commodity and a notoriously volatile one. The bearish take is that, once the factors pushing it upward subside, the enthusiasm for gold will peter out.

Case in point: Gold shot up in 2011 amid the last federal debt default standoff and a European debt crisis. When these two problems got resolved, gold tumbled—and did not return to its 2011 level until the pandemic spooked investors in 2020.

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The World Bank projects that gold will finish this year at $1,900 (below today’s price) and slump further to $1,750 at the end of next year. Its economists wrote in an analysis: “In 2024, gold prices are projected to decrease by 8% as the global economy begins to recover gradually and inflationary pressures recede.”

Another bearish scenario for gold has it slipping to $1,616 by year-end. This turns on a fall of inflation toward 2% and the Federal Reserve’s insistence on maintaining a hawkish line. The scenario is sketched out by investment firm WisdomTree’s Nitesh Shah, head of commodities and macroeconomic research in Europe. In fairness, Shah also has a possible bullish forecast in which gold keeps on elevating, to $2,314 at 2023’s end. In the optimistic take, inflation will not fall as much and the Fed will cut rates.

Meantime, gold looks like the place to be. The ebbing of the dollar’s strength has contributed to gold’s rally: The precious metal, denominated in U.S. dollars, benefits when the buck dips because gold becomes more affordable and buyers in other, now relatively stronger, currencies rush in, thus bidding up its prices.

Gold slid for much of 2022 as the dollar appreciated. But by late last year, the greenback declined—and gold took off. Other factors bolstering gold are still-high inflation (prompting investors to flock to bullion to protect their portfolio values) and international turmoil, ranging from the grinding Ukraine war to the prospect of a U.S. Treasury default. Also, central banks are enlarging their gold stores, which helps support the commodity’s price. Gold, as a long-time haven investment, should do well if the long-awaited recession occurs.

SPDR Gold Shares, the world’s largest exchange-traded fund for the metal, also is near its all-time high, set in 2020. The ETF, which is backed by physical gold (as opposed to shares of mining companies), closely tracks bullion prices globally. Investments continue to pour into gold ETFs, with net inflows of $824 million in April.

Ah, but as history shows, nothing lasts forever.