A U.S. judge ordered Wells Fargo (NYSE: WFC) to face a lawsuit alleging it defrauded shareholders by proclaiming its commitment to hiring diversity, even as it conducted sham job interviews of non-white and female applicants it had no plans to hire.
U.S. District Judge Trina Thompson in San Francisco, who dismissed a version of the lawsuit last August, on Monday found direct and indirect evidence that the San Francisco-based bank intended to defraud shareholders about its hiring practices.
She rejected arguments that there was insufficient proof that fake interviews were widespread, or that top officials including Chief Executive Charles Scharf knew about it.
Shareholders challenged 11 bank statements touting the success of a policy adopted in March 2020 that at least 50% of candidates interviewed for jobs paying at least $100,000 be minorities, women, or people in other disadvantaged groups.
They cited interviews with former employees, an internal whistleblower email, and the sudden retirement of a senior wealth manager who allegedly pressured the whistleblower into conducting fake interviews.
“The employee-submitted complaints, the peculiar timing of [the manager’s] departure, and defendants’ demonstrated focus on diversity issues supports a strong inference of [fraudulent intent] that is cogent and at least as compelling as an opposing inference that defendants remained oblivious,” Thompson wrote.
In a statement, Wells Fargo (NYSE: WFC) said it would continue defending against the lawsuit. It noted that the Department of Justice and Securities and Exchange Commission closed investigations into its hiring practices without taking action.
“Wells Fargo is deeply dedicated to diversity, equity, and inclusion and does not tolerate discrimination in any part of our business,” it added.
Lawyers for the shareholders did not immediately respond to requests for comment.
The fourth-largest U.S. bank has since 2016 faced many complaints and public criticism over its business practices, and remains under a Federal Reserve cap on asset growth.
Wells Fargo’s share price fell 10.2% over two days in June 2022, wiping out more than $17 billion of market value, after the New York Times reported the Justice Department probe.
The case is SEB Investment Management AB et al v Wells Fargo & Co, U.S. District Court, Northern District of California, No. 22-03811.
(Source: ReutersReuters)
