In a development that is drawing ire from consumer groups, Wells Fargo may actually reap a $240 million reward for its various scandals.
If a judge approves a proposed settlement, unnamed insurance companies will pay the scandal-plagued bank $240 million to settle allegations that top Wells Fargo officials knew about and ignored widespread misconduct at the bank, according to a report by American Banker.
While up to $68 million of that could go to pay attorneys’ fees, Wells Fargo could still make money from the deal, American Banker reported.
The proposed settlement is an attempt to resolve several cases known as shareholder derivative lawsuits – suits filed by shareholders seeking to recover money not for themselves, but for the company in which they own stock. In this case, Wells Fargo shareholders sued 20 current and former officers and directors of the bank, including CEO Tim Sloan and former CEO John Stumpf, American Banker reported.
After seven mediation sessions over the litigation, the parties reached a settlement agreement that called for Wells Fargo to be paid $240 million by insurance companies that issued liability coverage to the current and former directors who were named as defendants in the suit.
Consumer groups fumed at news of the settlement.
“First, banks escaped accountability for violations,” Kevin Stein, deputy director for the California Reinvestment Coalition, told American Banker. “Now they are somehow able to profit from them?”
“I don’t see how this helps the customers or workers who are the real victims of the litany of Wells Fargo scandals,” Ed Mierzwinski, senior director of the federal consumer program at the US Public Interest Research Group, told the publication.