Wells Fargo Wins One

A lawsuit brought against Wells Fargo by the Employees’ Retirement System of the State of Hawaii and subsequently by other class members was dismissed on May 6. The suit alleged that Wells Fargo defrauded shareholders by inflating the quality of its commercial loans, understated loss reserves and misstated its lending practices. Class members claimed they lost billions in Wells Fargo stock as the bank gradually revealed the “previously unknown level of risk” in its commercial loans. A federal judge concluded that the bank had underwriting standards that “proved largely accurate or conservative, not inflationary,” and did not mislead shareholders about the size of loans relative to the value of borrowers’ businesses. He said the shareholders, led by the Employees’ Retirement System of the State of Hawaii, could file an amended complaint to address deficiencies in their case.