Request Legal Help Now - Free
Advertisement
 
Home Page >> News Articles >> Why the Bid to Dismiss SEC Whistleblower..

Why the Bid to Dismiss SEC Whistleblower Lawsuit against Wells Fargo Failed

. By

While those managing a firm may attempt to engage in unsavory and illegal behavior to grow the fortunes of a company, directors responsible to governance at the Board level are held to a higher standard.

San Francisco, CAAn SEC whistleblower lawsuit against venerable banking giant Wells Fargo Co. is alleged to carry further allegations of SEC fraud according to legal analysis published by Law360 (12/11/17).

A shareholder derivative lawsuit in US District Court, Northern District of California (In re Wells Fargo & Co. Shareholder Derivative Litigation, Case No. 16-5541), asserts that certain directors of Wells Fargo may have been privy to the opening of fraudulent credit card and deposit accounts numbering into the millions without the knowledge, or consent of the account holders. Various lawsuits – including class actions – have been brought by disgruntled account holders who accused Wells Fargo of attempting to generate fees from the unauthorized accounts.

The shareholder derivative lawsuit brought against officers, directors and senior management of Wells Fargo asserts that director defendants “knew, or consciously disregarded that Wells Fargo employees were illicitly creating millions of deposit and credit card accounts for their customers, without those customers’ knowledge or consent,” according to Court documents. Plaintiffs further alleged that Wells Fargo, “under Defendants’ watch... [Sic] defrauded their customers in an attempt to drive up ‘cross-selling’ i.e., selling complimentary Wells Fargo banking products to prospective or existing customers.”

Wells Fargo attempted to have the litigation dismissed on various fronts, including an assertion made by the defendants that plaintiffs had failed to adequately plead the material misrepresentation, or omission and scienter elements of their claims under Section 10(b) and Rule 10b-5. Defendants also asserted that plaintiff’s complaint was, in effect a so-called “shotgun pleading” that impermissibly relied upon the “group pleading” doctrine.

In the end, however US District Court Judge Jon S. Tigar of the Northern District of California refused to dismiss the complaint, in part because in his view the plaintiffs did not rely exclusively on group pleading in their complaint, but rather articulated certain allegations of SEC fraud with regard to the signing of SEC filings by each director defendant that are alleged to contain material and misleading information as provided to the US Securities and Exchange Commission (SEC).

Directors should be held to a higher standard of conduct and care

It was noted in the legal opinion and analysis as outlined in Law360 that Judge Tigar had previously held that a variety of events, including congressional testimony, consumer lawsuits, news reports and widespread termination suggested that a majority of the director defendants knew about the alleged illegal activity involving the opening of fraudulent and unauthorized accounts.

“[W]hile it is true that not all of these red flags apply to the Officer Defendants, the Court’s logic applies with equal – if not greater – force to those defendants” because “it is implausible that Wells Fargo’s senior management, involved in the day-to-day operations of the bank and with greater access to the underlying cross-sell metrics and employee whistleblower complaints than independent board members, was unaware of the alleged fraud,” the opinion said.

The takeaway message here is that were a Board to become aware of repeated allegations of misconduct, any absence of a clear response on the part of directors could be interpreted as a director making a conscious decision to disregard his or her duties of oversight according to their responsibilities to the Board, the law and SEC rules and regulations – at least within the context of any motion by defendants to dismiss.

While there may be those within a firm who try to bend the rules – or engage in outright fraud – in an effort to grow the fortunes of the enterprise, directors need to be held to a higher standard.

READ ABOUT SEC FRAUD WHISTLEBLOWER LAWSUITS

SEC Fraud Whistleblower Legal Help

If you or a loved one have suffered losses in this case, please click the link below and your complaint will be sent to a whistleblower lawyer who may evaluate your SEC Fraud Whistleblower claim at no cost or obligation.
Request Legal Help Now

READER COMMENTS

Posted by

on
My name is VictoriaI've been baking with Wells Fargo since 1996. I am a family of 6 and during the time of the allegations against wells Fargo. I was notified by mail to submit any false information regarding unauthorized accounts that were opened under my name. To date I have documents and statements showing several open accounts under my name and under my children names. The unauthorized opened accounts were not only opened twice on each child but 4-5 times on myself. Even more so adding me to the credit protection plan after canceling it after the grace period.

ADD YOUR COMMENT ON THIS STORY

Fields marked * are mandatory. Please read our comment guidelines before posting.

*Name:

Note: Your name will be published with your comment.

*Email Address:

Your email will only be used if a response is needed.
*Your Comment:

Are you the defendant or a subject matter expert on this topic with an opposing viewpoint? We'd love to hear your comments here as well, or if you'd like to contact us for an interview please submit your details here.


Click to learn more about LawyersandSettlements.com
Request Legal Help Now! - Free