Wells Fargo & Co. will receive $240 million from insurers that will settle several lawsuits by shareholders in connection with the unauthorized-accounts scandal that rocked the San Francisco financial institution.
The payments will be made on behalf of 20 bank officials, including Timothy Sloan, the current chief executive, John Stumpf, the former CEO who resigned because of the controversy, and Carrie Toldstedt, the former head of Wells Fargo’s community banking division, according to a filing Thursday in U.S. District Court in San Francisco.
Also among the officials named as defendants in the suit were current and former members of the bank’s board of directors, including Transportation Secretary Elaine Chao, who served on the board from 2011 to 2017.
In the wake of the accounts scandal, shareholders sued the executives on behalf of Wells Fargo. The so-called shareholder derivative suits, some of which were consolidated by the court, alleged the bank officials “knew or consciously disregarded” that company employees were creating accounts without customer authorization,” the settlement said.
The suits sought to hold the bank officials “accountable for a scandal that has significantly damaged one of America’s largest financial institutions.”
Lawyers for the shareholders said the settlement was the largest insurance-funded cash settlement of any derivative lawsuit.
A Wells Fargo spokesman declined to comment.
The bank acknowledged the settlement in a securities filing on Wednesday.
The filing also said Wells Fargo could be required to pay as much as $2.7 billion more than it had set aside as of the end of December to resolve legal cases.
Additionally, the bank said in the filing that it was in early talks with the Justice Department and the Securities and Exchange Commission to resolve investigations into its sales practices.
Thursday’s settlement is one of several so far related to the controversy that The Times first reported in 2013. The bank acknowledged in 2016 that it had created perhaps millions of accounts without customers’ authorization. Other consumer abuses have come to light since then.
Stumpf and Tolstedt left the bank in the wake of the controversy, and Wells Fargo has overhauled its practices. Still, the Federal Reserve last year imposed growth restrictions on the bank, including a cap on its assets.
Fed officials said they would not lift the restrictions until they judge the bank’s consumer practices have improved. The restrictions are expected to remain in place through the end of this year.
The controversies have made Wells Fargo the poster child for bad behavior by giant banks. Sloan is expected to testify at a March 12 hearing by the House Financial Services Committee titled “Holding Megabanks Accountable: An Examination of Wells Fargo's Pattern of Consumer Abuses.”
Sen. Elizabeth Warren (D-Mass.), a 2020 presidential candidate, has called for Sloan to be fired because he was at the company at the time of the scandals.