FIND A LEGAL COUNSEL

Wells Fargo To Pay DOL $145M In Retirement Plan Misconduct Settlement

The U.S. Department of Labor announced Monday that Wells Fargo agreed to surrender $145 million after a department probe discovered that an employee stock ownership plan had been overcharged for shares of the company’s stock.

Wells FargoPhoto Credit: Shutterstock

The deal resolves an investigation by the DOL’s Employee Benefits Security Administration into a Wells Fargo ESOP managed by Wells Fargo & Co., Wells Fargo Bank, and plan trustee GreatBanc Trust Co., the regulatory agency said in its news release.

The DOL added that Wells Fargo and GreatBanc aren’t admitting or denying the agency’s allegations by agreeing to the settlement. Wells Fargo did make a statement on its corporate website Monday disclosing that they would pay $13.2 million to the DOL and $131.8 million to current and former 401(k) plan participants.

According to the EBSA’s investigative findings, it was revealed that from 2013 to 2018, Wells Fargo and GreatBanc caused the 401(k) plan to overpay for company stock. The companies caused the ESOP to make purchases of company stock at inflated prices, then used the stock to make loans to defray 401(k) plan contribution obligations, the agency noted.

“Our investigation found those responsible for Wells Fargo’s 401(k) plan paid more than fair market value for employer stock and, by doing so, betrayed the trust of the plan’s current and future retirees,” said Secretary of Labor Marty Walsh in a statement. “Today’s settlement shows the Department of Labor will act when we find retirement assets are misused and benefit plans suffer.”

Citing its probe, the DOL said Fargo and GreatBanc caused the 401(k) plan to pay somewhere in the range of $1,033 and $1,090 per share for preferred stock, and the stock converted to a set value of $1,000 in Wells Fargo common stock when dispersed to participants in the plan.

As part of the settlement, GreatBanc agreed to not act as a fiduciary to a public company in connection with any future leveraged transaction involving an ESOP, “unless the plan acquires only publicly traded stock and pays no more than the fair market value.”

The DOL’s acting head of EBSA, Ali Khawar, said in a statement Monday that the settlement demonstrated “that the Employee Benefits Security Administration will not allow participants to be harmed by ERISA plans that overpay for plan assets.”

In a statement on its website, Fargo said, “though the company disagrees with the DOL’s allegations and has not conducted these transactions since 2018, Wells Fargo believes resolving this legacy matter is in the best interest of the company.”

“The company strongly disagrees with the DOL’s allegations and believes it followed applicable laws in conducting the transactions,” the bank continued.

Read more articles from Haute Lawyer, visit https://hauteliving.com/hautelawyer

Source: https://www.law360.com/articles/1529429

FIND A LEGAL COUNSEL