New York employees and customers of Wells Fargo Bank may be familiar with the controversy over the company's stock. It has been alleged that Wells Fargo used aggressive sales tactics to get customers to open accounts. As a result of the tactics, millions of unauthorized customer accounts were opened, and the bank's stock price was inflated. After the illegal sales processes were disclosed, the value of Wells Fargo shares fell by 12 to 15 percent.
Several Wells Fargo employees who are company retirement plan participants are now filing lawsuits against the bank under the Employee Retirement Income Security Act. The plaintiffs are seeking class action status and alleging that Wells Fargo executives violated ERISA by continuing to offer Wells Fargo stock as an investment option in those plans.
According to the lawsuits, executives at Wells Fargo knew that company stock was not a good investment option due to the illegal sales processes that would soon be revealed to the public. Knowing the inflated stock price was likely to go down soon, Wells Fargo executives continued to include stocks as an investment option. The plaintiffs argue that Wells Fargo would not have violated insider trading laws by freezing the purchase or sale of company stocks.
The plaintiff further allege a breach of fiduciary duty. The CEO of Wells Fargo was pressured into resigning, and the bank faces further civil penalties. In the meantime, attorneys representing other Wells Fargo employees will be watching the progress of these class action lawsuits with interest and a view to perhaps having their clients joining existing classes.