Wells Fargo wins commercial loan lawsuit dismissal

May 6 (Reuters) – A federal judge on Friday dismissed class action lawsuits alleging Wells Fargo & Co (WFC.N), the fourth-largest U.S. bank, deceived or defrauded shareholders over its business loans.

U.S. District Judge William Alsup in San Francisco said shareholders failed to sufficiently allege that Wells Fargo unjustifiably inflated the quality of its loans, understated loss reserves or misrepresented its lending practices.

Shareholders claimed they lost billions of dollars in Wells Fargo stock as the San Francisco-based bank gradually revealed in 2020 the “previously unknown level of risk” in its commercial loans.

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The proposed class covers shareholders in the three years ending October 13, 2020, a period when Wells Fargo stock price fell 54%.

But the judge found that Wells Fargo had underwriting standards that “have been found to be broadly accurate or conservative, and not inflationary”, and have not misled shareholders about the amount of loans relative to the companies’ value. borrowers.

Because he found no false or misleading statements, Alsup did not say whether Wells Fargo intended to defraud anyone.

He said the shareholders, led by the Hawaii State Employees Retirement System, could file an amended lawsuit to address the shortcomings in their case.

Attorneys for the shareholders did not immediately respond to requests for comment. Wells Fargo and its attorneys did not immediately respond to similar requests.

Since 2018, Wells Fargo has operated under consent orders from the Federal Reserve and two other U.S. financial regulators to improve governance and oversight. The Fed also capped the bank’s assets at $1.95 trillion.

The bank has faced widespread criticism over its practices since 2016, including for opening accounts without customer permission and charging borrowers for car insurance they didn’t need.

The case is Hawaii State Employees Retirement System v. Wells Fargo & Co, US District Court, Northern District of California, No. 20-07674.

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Reporting by Jonathan Stempel in New York; Editing by David Gregorio

Our standards: The Thomson Reuters Trust Principles.

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