Two weeks after Wells Fargo & Co. agreed to settle a Department of Labor investigation that found the bank overpaid for company stock purchased for its 401(k) plan, a class-action lawsuit was filed in U.S. District Court alleging the settlement didn't go far enough.
Three participants in the Wells Fargo & Co. 401(k) Plan, San Francisco, filed the class-action lawsuit Monday in U.S. District Court in Minneapolis alleging Wells Fargo paid "more than fair market value" — with help from plan trustee GreatBanc Trust Co. — "when acquiring Wells Fargo preferred stock for the ESOP portion of the plan."
"Wells Fargo stole from the plan and its own employees, and GreatBanc, which was charged with protecting the participants' interests, aided and abetted this theft," the lawsuit stated.
The Labor Department on Sept. 12 announced a settlement with Wells Fargo after its investigation.
Wells Fargo, which did not admit to or deny the Labor Department's allegations, agreed to pay about $145 million — roughly $131.8 million to the plan's eligible current and former participants and a $13.2 million penalty — to settle the matter.
The Labor Department investigation found that Wells Fargo and GreatBanc caused the plan to pay between $1,033 and $1,090 per share for Wells Fargo preferred stock. Specifically designed for the plan, the stock converted to a set value of $1,000 in Wells Fargo common stock when allocated to participants, according to the Labor Department. In transactions between 2013 and 2018, the plan borrowed money from Wells Fargo to purchase the preferred stock, the department noted.
The lawsuit filed Monday — Beville et al v. Greatbanc Trust Co. et al. — said the "$131.8 million collected by the DOL for 2012-2018 is far less than the $401.5 million in reclassified dividend payments taken from the plan by Wells Fargo from 2017-2019."
The lawsuit added, "Wells Fargo, with the knowledge and consent of the other defendants, converted plan assets for its own use in blatant violation of ERISA's prohibited transaction provisions. This was theft of participants' retirement savings, an important part of their compensation package."
A Wells Fargo spokeswoman declined to comment on the lawsuit, but in a statement after the Labor Department settlement, the company said that though it disagrees with the department's allegations and has not conducted these transactions since 2018, it believes "resolving this legacy matter is in the best interest of the company."
A representative from GreatBanc couldn't immediately be reached for comment.
The Wells Fargo & Co. 401(k) Plan had $48.8 billion in assets as of Dec. 31, 2020, according to the most recent Form 5500 filing.