(HR Dive) - Wells Fargo neither admitted nor denied the Labor Department’s allegations, and noted that the transactions in question stopped in 2018.
Dive Brief:
- Wells Fargo has agreed to pay roughly $145 million to settle a Labor Department (DOL) investigation into allegations that a 401(k) plan for bank employees overpaid for Wells Fargo preferred stock between 2013 and 2018.
- Wells Fargo and GreatBanc Trust Co., a trustee of the 401(k) plan, caused the plan to pay between $1,033 and $1,090 per share for Wells Fargo preferred stock rather than a set value of $1,000, the DOL’s Employee Benefits Security Administration found, according to an announcement Monday.
- The $145 million figure breaks down to $131.8 million the bank will pay out to reimburse eligible current and former 401(k) plan participants, as well as a $13.2 million penalty to the DOL. In its own press release Monday, Wells Fargo called the settlement a “previously disclosed, legacy matter.”
Dive Insight:
“The Company strongly disagrees with the DOL’s allegations and believes it followed applicable laws in conducting the transactions,” the bank said Monday. However, “Wells Fargo believes resolving this legacy matter is in the best interest of the Company.”
The 401(k) plan borrowed from Wells Fargo to buy the preferred stock, then the bank used the dividend the repay the loans, offsetting what the bank would be obliged to pay in 401(k) contributions, the DOL found.
“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,” Labor Secretary Marty Walsh said in a statement Monday. “Today’s settlement shows the Department of Labor will act when we find retirement assets are misused and benefit plans suffer.”
As part of the settlement, Wells Fargo agreed to redeem certain preferred securities held by the 401(k) plan in exchange for common stock.
Wells is not the only entity to see enforcement from Monday’s action. GreatBanc will not act as a fiduciary to a public company in connection with any future leveraged transaction involving an employee stock ownership plan, unless the plan acquires only publicly traded stock and pays no more than the fair market value, the DOL said.
By Dan Ennis
September 12, 2022
