Investors Reach $62 Settlement with Wells Fargo Bank’s related to the Bank’s Securities Lending Program
August 18, 2014 – Zimmerman Reed is pleased to announce that the United States District Court, District of Minnesota granted final approval of a $62.5 million settlement in a class action against Wells Fargo Bank on behalf of participants in the Bank’s securities lending program. The total settlement amount is among the largest recoveries achieved in a securities lending class action stemming from the 2008 financial crisis. The settlement was literally achieved on the courthouse steps the weekend before a jury trial was scheduled to commence. Carolyn Anderson stated that, “Wells Fargo had prevailed on a similar case just last year. This settlement represents an outstanding result for the pensions and other investors. Our success was only possible after years of hard-fought litigation and intense trial preparation.” The settlement proceeds will be shared by a class of approximately 100 pension funds, corporations, insurance companies and others who participated in Wells Fargo Bank’s securities lending program from January 1, 2006 to present. The City of Farmington Hills Employees Retirement System v. Wells Fargo Bank, N.A., Civil No. 10-4372 DWF/JJG.
City of Farmington Case Background
As part of its securities lending program, Wells Fargo, a San Francisco-based bank, loaned securities of participating investors to third-party borrowers in return for cash collateral. Then, Wells Fargo invested the collateral and shared a percentage of the revenue with the original investors. Investors participating in the program entered into lending agreements with Wells Fargo. Those agreements promised that “[t]he prime considerations for the investment portfolio shall be safety of principal and liquidity requirements.” The investors have alleged that Wells Fargo violated those agreements by investing in illiquid and risky products such as mortgage-backed securities. And Wells Fargo concealed investment performance information from investors in order to prevent them from exiting the program.
January 14, 2014: Judge Frank granted the investors’ request to add ERISA class representativesand certified asubclassof thirty ERISA plans that participated in Wells Fargo’s securities lending program. The Court also denied Wells Fargo’s motion to reconsider the certification of the class to include six plaintiffs who invested in Wells Fargo’s “separately managed” accounts. For the third time, Wells Fargo challenged the Court’s decision, arguing that evidence related to the Business Trust is entirely irrelevant to those six class members who did not invest in the Business Trust. The Court rejected this argument.
March 27, 2012 – Court Certifies Class Action: Judge Frank certified the case as a class action, rejecting Wells Fargo’s argument that its duties and obligations to the investors were distinct from one another because they signed different agreements and participated in different investment pools:
“The Court notes, however, that a common mandate to ensure liquidity and safety of principal existed across all of the funds. Wells Fargo’s bald assertion that membership in a trust versus a non-trust pool would alter the contract and fiduciary duty claims is not enough to overcome the fact that all of the [securities lending agreements] contained the same ‘prime considerations [of ensuring liquidity and safety of principal],’ and Wells Fargo has failed to substantiate its claim.” Accordingly, the Court certified the following class:
All participants in Defendant Wells Fargo Bank, N.A.’s securities lending program (the “Program”) from any time in the period January 1, 2006 to the present who suffered losses due to the Program’s purchase and maintenance of high risk, long-term securities.
June 1, 2012: A Notice regarding the pending class action was mailed to the entities that fall within the definition of the certified class.
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