(Reuters) – A federal judge on Friday dismissed class-action claims that Wells Fargo & Co, the fourth-largest U.S. bank, misled or defrauded shareholders about its commercial loans.
U.S. District Judge William Alsup in San Francisco said shareholders failed to adequately allege that Wells Fargo unjustifiably inflated the quality of its loans, understated loss reserves or misstated its lending practices.
Shareholders claimed to have lost billions of dollars in Wells Fargo stock as the San Francisco-based bank in 2020 gradually revealed the “previously unknown level of risk” in its commercial loans.
The proposed class covers shareholders in the three years ending Oct. 13, 2020, a period when Wells Fargo’s share price fell 54%.
But the judge concluded that Wells Fargo had underwriting standards that “proved largely accurate or conservative, not inflationary,” and did not mislead shareholders about the size of loans relative to the value of borrowers’ businesses.
Because he found no false or misleading statements, Alsup did not address whether Wells Fargo intended to defraud anyone.
He said the shareholders, led by the Employees’ Retirement System of the State of Hawaii, could file an amended complaint to address deficiencies in their case.
Lawyers for the shareholders did not immediately respond to requests for comment. Wells Fargo and its lawyers did not immediately respond to similar requests.
Since 2018, Wells Fargo has operated under consent orders from the Federal Reserve and two other U.S. financial regulators to improve governance and oversight. The Fed also capped the bank’s assets at $1.95 trillion.
The bank has faced much criticism over its practices since 2016, including for opening accounts without customer permission and charging borrowers for auto insurance they did not need.
The case is Employees’ Retirement System of the State of Hawaii v. Wells Fargo & Co, U.S. District Court, Northern District of California, No. 20-07674.
Source: Read Full Article