Feb. 28, 2018
Public Citizen Welcomes Judge’s Decision in Wells Fargo Class Action
Statement of Bartlett Naylor, Financial Policy Advocate, Public Citizen’s Congress Watch Division
Note: On Feb. 27, U.S. District Court Judge Jon Tigar in San Francisco ruled that shareholders can proceed with a suit alleging Wells Fargo and its current and former leaders misled shareholders about its opening of unauthorized accounts. The class action lawsuit in Hefler v. Wells Fargo blames the company for a nine percent drop in share price after details of the scandal became public in Sept. 2016.
This welcome ruling demonstrates the importance of class action lawsuits in bringing relief to individuals who are defrauded. Wells Fargo trumpeted its sales of multiple products to individual customers, known as cross-selling, generating a rising stock price and triggering millions of dollars in executive bonuses. When the U.S. Consumer Financial Protection Bureau (CFPB) showed millions of those accounts were bogus, the stock plummeted, costing shareholders billions of dollars.
This ruling also starkly contrasts with conspicuous inaction in Washington, D.C. The U.S. Department of Justice has yet to bring charges against any senior Wells Fargo executive for the scandal. Under Trump appointee and part-timer Mick Mulvaney – given his other position at the U.S. Office of Management and Budget – the CFPB has taken no steps to address Wells Fargo misconduct. And the U.S. Securities and Exchange Commission is contemplating whether to shut down class action lawsuits altogether, a disastrous move that would force investors into secretive, binding arbitrations and would have blocked cases like this one from moving forward.
With President Donald Trump defanging the Wall Street cops, class action lawsuits represent one of the few tools left to help victims and deter fraud.