Wells Fargo & Co. has reached another major financial settlement involving its sales practices, this time agreeing to pay $240 million to resolve a shareholder lawsuit filed in northern California.
The bank disclosed the settlement in a quarterly regulatory filing Wednesday. The settlement requires approval from a federal judge.
Separately in the same disclosure section, Wells Fargo said it is involved in “preliminary and/or exploratory resolution discussions” with the U.S. Justice Department and the Securities and Exchange Commission about its retail sales practices.
The payment will be made by insurers covering up to 20 current and former directors and officers, including retired chairman and chief executive John Stumpf and current chief executive Timothy Sloan. The bank will pay the plaintiffs’ attorneys fees.
Stumpf retired just a month later after heated cross-examination before the U.S. Senate Banking Committee. Although the revamped Wells Fargo board of directors has supported Sloan since he became CEO in October 2016, he has faced numerous calls for his firing, most publicly from U.S. Sen. Elizabeth Warren, D-Mass., and a declared 2020 Democratic presidential candidate.
The projected settlement means Wells Fargo has paid or agreed to pay close to $3.9 billion in regulatory fines.
The latest settlement involving several shareholder lawsuits focused on how the bank handled derivatives.
According to Investopedia, a derivative is a financial security with a value that is reliant upon, or derived from, an underlying asset or group of assets. The derivative itself is a contract between two or more parties, and its price is determined by fluctuations in the underlying asset.
The Wells Fargo disclosure said the lawsuits claimed “breach of fiduciary duty” by defendants “for their alleged failure to detect and prevent sales practices issues.” The defendants denied wrongdoing in the lawsuits.
The settlement is the latest involving the bank since its fraudulent customer-account scandal surfaced in September 2016.
On Sept. 1, 2017, the bank confirmed that at least 3.53 million checking and credit-card accounts were affected by the scandal.
The bank has said it cannot rule out that 38,722 unauthorized customer accounts were established in North Carolina and 23,327 in South Carolina.
Reuters reported Friday that lawyers for the shareholders claimed it is the largest insurer-funded cash settlement of a U.S. shareholder derivative lawsuit.
Wells Fargo spokesman Peter Gilchrist deferred bank comment to the SEC filing.
Wells Fargo also said in Wednesday’s filing that it may have to set aside as much as $2.7 billion in accruals related to potential losses from legal actions. That’s up $500 million from the $2.2 billion it estimated on Sept. 30.
“The outcomes of legal actions are unpredictable and subject to significant uncertainties, and it is inherently difficult to determine whether any loss is probable or even possible,” the bank said.
“It is also inherently difficult to estimate the amount of any loss, and there may be matters for which a loss is probable or reasonably possible but not currently estimable.
“Wells Fargo is unable to determine whether the ultimate resolution of the retail sales practices matters will have a material adverse effect on its consolidated financial condition.”
The SEC, U.S. Justice Department, U.S. Labor Department and several state attorney general and Congressional committees have undertaken formal or informal inquiries, investigations or examinations arising from the scandal.
In October, the bank agreed to pay $65 million to resolve the New York Attorney General’s investigation.
In November, the bank agreed to pay up to $43 million as part of settling class-action lawsuits involving the bank’s role as trustee for certain residential mortgage-backed securities.
In December, the bank agreed to pay a combined $575 million to settle an investigation involving 50 state attorneys general and the District of Columbia into its retail sales practices.
On Feb. 2, Wells Fargo released its latest mea culpa on the scandal, representing another attempt at “rebuilding trust with stakeholders and transforming the company.”
However, the 103-page report may serve as much to galvanize the bank’s critics as to improve confidence in the bank, its management team and board of directors.
The latest report is a fulfillment of the pledge by Wells Fargo’s board and management to shareholders led by the Interfaith Center on Corporate Responsibility.
The bank’s Business Standards Report is titled “Learning from the past, transforming for the future.” It details steps the bank has taken “to address causes of past issues and provides updates on the company’s businesses, practices and progress on its six (rebuilding) goals.”
The report did not include any new regulatory or legal developments.