Wells Fargo embroiled in 401(k) lawsuit over cross-selling scandal

InvestmentNews
November 02, 2016

Wells Fargo & Co.'s legal troubles are mounting following revelations of the bank's recent cross-selling scandal last month.

A participant in the Wells Fargo 401(k) plan has sued the company over a “material drop” in its stock price following news of the scandal, characterized as a “criminal epidemic” that caused hundreds of millions of dollars in damages to the retirement plan, according to a court filing.

“Defendants intentionally withheld material non-public information from Plan Participants invested in Wells Fargo stock and the public at large about a criminal epidemic at Wells Fargo associated with a critical component of Wells Fargo's business model and key driver of its stock price — i.e., cross-selling,” according to the lawsuit, Allen v. Wells Fargo & Co. et al.

The suit, filed Oct. 7 in Minnesota federal court, was first reported by Bloomberg BNA.

Approximately 34% of assets in the company 401(k), a massive $36 billion plan with more than 360,000 participants, are invested in Wells Fargo common stock, according to BrightScope Inc., a 401(k) ratings provider. Read More.