US District Judge Jon Tigar said that shareholders can continue with a lawsuit that alleged that top Wells Fargo officials ignored the issue as sales employees faced “unrelenting” pressure to meet quotas, prompting many to open phony customer accounts. The lawsuit also claims the bank’s top execs misled the public about fraudulent practices, according to a Reuters report.
“Where, as here, plaintiffs’ claims arise from a pervasive and undisputed fraud going to the core of the company’s business, it is reasonable to infer senior executives knew about, or at least recklessly turned a blind eye to, the stream of red flags,” Tigar wrote in his decision.
There were plenty of issues to raise red flags. Wells Fargo has been rocked by one scandal after another since news broke last year that it had opened millions of phony customer accounts
. Since then, it has been revealed that the bank made mortgage modifications without borrowers’ knowledge or consent, added unnecessary insurance to the car loans of hundreds of thousands of customers, and charged mortgage borrowers rate-lock extension fees
for delays that were the bank’s own fault.
Tigar said in his ruling that in the “unlikely” event that Sloan didn’t know about the bank’s various questionable practices before 2013, when he was chief financial officer, he was “certainly aware of these issues” by December of 2013, when he told the Los Angeles Times that he was “not aware of any overbearing sales culture.”
Wells Fargo spokesman Peter Gilchrist told Reuters that the bank was taking “decisive steps” to rebuild trust from shareholders, employees and customers, but that it would “advocate strongly for our positions before the courts.”
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Wells Fargo’s officers and directors, including CEO Tim Sloan, can’t duck a lawsuit by shareholders seeking to hold them personally liable in the megabank’s fake-accounts scandal, a judge has ruled.