ERSRI is a court-appointed co-lead plaintiff in this action, along with the Public Employees' Retirement System of Mississippi, Jackson, and Swedish mutual fund manager Handelsbanken Fonder AB, the release noted.
Michelle Moreno-Silva, director of communications for Rhode Island's Office of the General Treasurer James A. Diossa, said by email that ERSRI lost $6.1 million through its holdings in Wells Fargo shares.
In 2018, Wells Fargo entered into consent orders with the Federal Reserve Board, Office of the Comptroller of the Currency and Consumer Financial Protection Bureau to fix its governance and oversight failures that had allowed systemic fraudulent practices at the bank, including the opening of millions of unauthorized bank accounts and the charging hundreds of thousands of borrowers for unnecessary insurance without their consent, Mr. Diossa noted in the release.
Moreover, the Federal Reserve Board slapped an asset cap limit that barred Wells Fargo from expanding its assets until it had fully complied with the consent order.
However, plaintiffs in the case alleged that Wells Fargo's top executives then repeatedly told investors that regulators were satisfied with the bank's progress in fulfilling the consent orders and that the asset cap would be removed in a timely manner.
Actually, Mr. Diossa noted, federal regulators repeatedly rejected Wells Fargo's plans. Consequently, as a result of the bank's alleged false and misleading statements and omissions, Wells Fargo common shares traded at artificially inflated prices, making investors pay more for the stock than it was actually worth.
In March 2020, the House Financial Services Committee released a report after a year-long investigation stating that Wells Fargo was not in compliance with the consent orders and did not take the necessary steps to satisfy its obligations. Wells Fargo shares subsequently plunged in value.
"Wells Fargo betrayed the trust of Rhode Island pensioners and is now rightly facing consequences because of that," said Ms. Diossa.
The settlement remains subject to approval by the court, and the litigation is pending in the Southern District of New York, the release added.
ERSRI had net assets of $10.5 billion as June 30, 2021, according to its annual report for fiscal 2021.
PERS of Mississippi had net assets of $31.9 billion as of March 31, according to its latest investment report.
Wells Fargo could not be immediately reached for comment.