According to the law firm press release, Wells Fargo is a diversified financial services company that provides retail, commercial and corporate banking services, principally in the United States.
The Company has three reportable operating segments, Community Banking, Wholesale Banking, and Wealth and Investment Management. A key part of Wells Fargo's business strategy is "cross-selling," which entails selling its existing customers more retail products. Wells Fargo's execution on its cross-selling opportunities was considered central to the Company's business and growth prospects.
The complaint alleges that during the Class Period, defendants made materially false and misleading statements regarding the Company's true financial condition, financial performance and future prospects, including about the source of its growth in products per household and the success of its overall strategy of cross-selling its products. Specifically, throughout the Class Period, defendants made false and misleading statements and/or failed to disclose that Wells Fargo's cross-selling efforts to retail customers were neither designed to meet customers' financial needs nor drive customer satisfaction, but rather were the product of a carefully designed system that resulted in the Company illegally, through forgery and other electronic means, opening millions of deposit and credit card accounts for customers without their knowledge in an effort to generate fee income for Wells Fargo and compensation rewards for Wells Fargo employees, including defendants. Wells Fargo also failed to disclose that an ongoing internal investigation had in fact determined by the beginning of the Class Period that employees in the Community Banking segment had engaged in a wide ranging scheme to inflate the Company's financial performance figures by opening millions of unauthorized deposit and credit card accounts, ultimately resulting in more than 5,000 employee terminations. As a result of defendants' false statements and/or omissions during the Class Period, Wells Fargo stock traded at artificially inflated prices, reaching a high of over $58 per share and allowing certain of the defendants to sell more than $31 million worth of their own Wells Fargo stock at artificially inflated prices.
On September 8, 2016, the U.S. Consumer Financial Protection Bureau ("CFPB") imposed a fine of more than $185 million on Wells Fargo and published a Consent Order detailing the Company's fraudulent practices, which were centered on a corporate culture intent on growing its cross-selling opportunities and unlawfully and without its customers' consent opening millions of unauthorized deposit and credit card accounts. In the days following the CFPB announcement, several media outlets issued articles detailing the scandal. The complaint alleges that as a result of these revelations, between September 8, 2016 and September 16, 2016, the Company's stock price declined 9%, from a close of $49.90 per share on September 8, 2016 to a close of $45.43 per share on September 16, 2016, as information about defendants' conduct and its impact on Wells Fargo's operations reached the market.
On January 5, 2017, the Court appointed Lead Plaintiff and Counsel. Lead Plaintiff filed a consolidated Complaint on March 6. On June 19, Defendants filed Motions to Dismiss the consolidated Complaint. On February 27, 2018, the Court issued an Order granting in part and denying in part Defendants' Motions to Dismiss. On March 15, Lead Plaintiff filed a second consolidated Complaint.
On May 4, the Parties announced that they had reached an agreement in principle to settle the case. On July 30, the Parties entered into a Stipulation and Agreement of Settlement. The Court issued an Order granting preliminary approval of the Settlement on September 4.