A federal judge announced that all current and former Wells Fargo & Co. officers and directors, including CEO Tim Sloan, will be faced with a lawsuit by shareholders seeking to hold them personally liable for sales abuses and the creation of millions of unauthorized accounts.
U.S. District Judge Jon Tigar in San Francisco said shareholders can proceed with a suit alleging the company’s top brass “repeatedly and brazenly” failed to serve Wells Fargo’s best interests. He found the complaint properly laid out. There was enough evidence showing executives and directors made false statements about the scheme in the bank’s filings to the U.S. Securities and Exchange Commission.
Sloan acknowledged that not only were customers hurt by the 2 million phony deposit and credit card accounts opened without their knowledge – so were the Wells Fargo employees.
“I want to apologize to all of you,” he said in a prepared statement before an audience of Wells Fargo employees at the Knight Theater in Charlotte late Tuesday. “I want to say we’re sorry for the pain you have experienced as team members as a result of our company’s failures.”
The bank will be hiring third-party culture experts to “help us understand where we have cultural weaknesses that need to be strengthened and fixed,” the prepared remarks said.
As of April the bank had reportedly spent at least $445 million on fines, remediation, consultants and civil litigation. The company still faces a raft of investors’ securities suits seeking to recoup losses from a $30 billion decline in market capitalization after the scandal broke and wrongful-termination cases filed by fired bankers. The company had announced in August that its review found employees may have created 3.5 million bogus accounts, more than 60 percent higher than its initial estimate.
How the company’s board and executive managers deal with this lawsuit and take remedial action for their wrongdoing is something all Wall Street analysts will have their eyes on.