Wells Fargo & Co came to a settlement with U.S. shareholders to pay an amount of $240 million to resolve several lawsuits filed by the shareholders after an unauthorized-account scandal surfaced which unveiled that millions of unauthorized customer accounts had been opened by bank employees without the consent of the respective customers.
The settlement, which requires to be approved by a judge, was filed with U.S. District Court in San Francisco on Thursday.
The settlement amount of $240 million will be paid by insurers to the bank on behalf of 20 bank current and former Wells Fargo executives and directors including the current chief executive Timothy Sloan, the former CEO John Stumpf, who resigned because of the scandal, the former head of Wells Fargo’s community banking division Carrie Toldstedt, and Elaine Chao, a board member who remained attached with the board as Transportation Secretary from 2011 to 2017, according to the filing.
In wake of the unauthorized accounts scandal, shareholders filed lawsuits against the executives on behalf of the Wells Fargo, alleging them for breach of their fiduciary duties as they knowingly disregarded, that the bank employee were creating bogus accounts without customer’s consent, and remained failed to stop that practice of unauthorized account creation.
The shareholders filed several derivative lawsuits against the bank officials, some of which were consolidated by the court during the course of legal proceedings, and the current settlement will now resolve the claims of shareholders against the executives as the bank has already settled with the government in 2016 to pay $190 million over its sales practices.
Lawyers for the shareholders, led by pension plans in Colorado and Alabama, said the settlement is the largest insurance-funded cash settlement in the United States of any derivative lawsuit.
Wells Fargo, in a securities filing on Wednesday, not only acknowledged the current settlement but also stated that it might have to pay up to $2.7 billion to resolve legal cases, an amount more than amount set aside by the bank as of the end of December.