Wells Fargo has agreed to pay $32.5 million to settle a two-year-old case involving alleged self-dealing with the company’s 401(k) plan.
Wells Fargo, which had previously sought to dismiss the lawsuit last February, agreed to the settlement without admitting any wrongdoing.
Victor J. Blue/Bloomberg
The lawsuit, which dates to March 2020, contended that Wells Fargo breached its fiduciary duty with its retirement plan by investing in funds affiliated with the company, overlooking their high fees and underperformance measured against comparable retirement products.
The agreement would recover 40% of all the estimated damages incurred by the plan participants, according to the settlement.
“This suit is about corporate self-dealing at the expense of the retirement savings of company employees,” Yvonne Becker, the initial plaintiff, a former Wells employee who worked for the company for 26 years, said in the original complaint. “Defendants in this case violated that bedrock principle by favoring the economic interests of Wells Fargo & Company over those of the plan participants to whom they owe the highest duty.”
In an emailed statement, Wells Fargo said: “We have reached a mutually acceptable agreement and are pleased to put this matter behind us.” A company spokeswoman declined to comment on any changes Wells Fargo has made to its retirement plan in response to the lawsuit.
Wells Fargo, which had previously sought to dismiss the lawsuit last February, agreed to the settlement without admitting any wrongdoing.
Michelle Yau, an attorney for the plaintiff, with the law firm Cohen Milstein Sellers & Toll, said in an email that her team is “very pleased with the proposed settlement” and looking forward “to the upcoming preliminary approval hearing.”
The case is the latest flashpoint in the debate over how the companies that administer and profit from retirement funds should handle those assets within the plans they provide for their own employees. Major fund companies and employers alike have been targeted in a wave of litigation asserting fiduciary violations under the Employee Retirement Income Security Act, or Erisa.
Wells Fargo’s “Employee Benefit Review Committee selected and retained several Wells Fargo-affiliated funds in violation of Erisa,” attorneys for the plaintiff said in a court filing seeking approval of the settlement. The alleged breach of fiduciary responsibilities under Erisa “caused losses to the class in the form of unnecessarily high fees or underperformance,” according to the filing, which was initially brought by Becker and has since expanded into a class action.
Wells Fargo and the plaintiffs began the mediation process last November and settled on rough terms of the agreement in January, according to a court filing. The proposed settlement would open the class to anyone who participated in Wells Fargo’s retirement plan from March 13, 2014 through the date when the court finalizes the settlement, excluding any employees who were members of the company’s benefits review committee.
The plaintiffs estimate that there are more than 500,000 eligible class members, and that at least 400,000 participated in one of the retirement funds at issue.
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