A California federal judge has granted preliminary approval to a proposed $320 million settlement that would end shareholders’ derivative litigation relating to Wells Fargo’s fake accounts scandal. Plaintiffs in the suit, including the Fire & Police Pension Association of Colorado and the City of Birmingham Retirement and Relief System allege that since at least 2011, the Board and executive management of Wells Fargo knew or consciously disregarded that its employees were illicitly creating millions of deposit and credit card accounts for their customers, without those customers’ consent, in order to meet aggressive sales goals.
As reported by Law360 (subscription), the judge found the proposed settlement “cleared an initial evaluation of its fairness, reasonableness and adequacy,” setting a final hearing date for August of 2019. According to the publication, the deal between investors in the bank and its current and former top executives is the largest-ever insurer-funded cash settlement of a shareholders derivative action.
“The court has reviewed the settlement and did not find any obvious deficiencies,” wrote U.S. District Judge Jon S. Tigar of the Northern District of California in a 14-page order issued on May14th . “To the extent any shareholder calls attention to any such deficiency, the court will consider it at the final hearing.”
Settlement details call for a $240 million cash payment to be made to Wells Fargo on behalf of the bank’s directors-and-officers liability insurers and require that the bank make executive compensation cuts and institute a set of corporate governance reforms.