In one of the largest shareholder derivative lawsuit settlements ever, the parties to the consolidated Wells Fargo derivative suit arising out of the bank’s phony customer account scandal have agreed to settle the case for a variety of cash and non-cash benefits with a stated value to the company of $320 million, inclusive of a cash payment of $240 million. The $240 million cash portion of the settlement is to be paid by the bank’s D&O insurers, in what is, according to the plaintiffs’ counsel, “the largest insurer-funded cash component of any shareholder derivative settlement in history.” This settlement represents the latest in a series of derivative suit settlements with a significant cash component, a case resolution pattern in high-profile derivative suits that arguably represents the new normal in the world of D&O liability exposures.
Continue Reading Massive Settlement in Wells Fargo Bogus Account Scandal Derivative Suit

Wells Fargo has agreed to pay $480 million to settle the securities class action lawsuit arising from the company’s fake customer account scandal. The lawsuit followed in the wake of allegations that the bank had opened millions of accounts on behalf of customers frequently without the customers’ knowledge or consent, and in some instances based on fictitious customer information. As discussed below, the massive securities suit settlement, which is subject to court approval, is among the largest ever. The company’s May 4, 2018 press release about the settlement can be found here. The settlement was also disclosed in the company’s May 4, 2018 filing on Form 10-Q, here. A May 4, 2018 press release about the settlement by Union Investment, the lead plaintiff in the action, can be found here.
Continue Reading Wells Fargo Settles Phony Account Securities Suit for $480 Million

wells fargoOne of the recurrent governance proposals to remedy corporate excesses has been the idea of clawing back the compensation paid to company officials who presided over corporate scandals. Both the Sarbanes Oxley Act and the Dodd-Frank Act included provisions mandating compensation clawbacks for corporate executives at companies that restate their financial statements. As Columbia Law School Professor John Coffee details in his November 21, 2016 CLS Blue Sky Blog article entitled “Clawbacks in the Age of Trump” (here), despite these statutory revisions, the use of “extreme incentive compensation” continues to motivate corporate behavior. In order to counter-balance the impact of incentive compensation, Coffee suggests that companies should adopt their own compensation clawback requirements that apply more broadly than the statutory clawback provisions.
Continue Reading Carrot and Stick: Incentive Compensation and Compensation Clawbacks