Five years later, litigation stemming from the financial crisis continues to unfold, as a federal court jury in St. Paul, Minnesota cleared Wells Fargo of liability for losses incurred by Blue Cross Blue Shield of Minnesota and other institutional investors.
The case represents one of five lawsuits against Wells Fargo in Minnesota alone, all of which relate to the San Francisco-based bank’s securities lending activities in 2008. In this case, which was filed in September 2011 and went to trial on June 18 this year, the plaintiffs wanted Wells Fargo to pay for $8.2 million in losses for what they alleged to be a breach of fiduciary duty by the bank. With the cash collateral collected from securities lending, Wells Fargo invested their clients’ money in riskier assets such as structured investment vehicles (SIVs) and mortgage-backed securities, rather than more conservative, liquid investments.
However, Wells Fargo contended that the investments seemed safe at the time and that they should not be held responsible for the losses since they came as a result of the entire financial system crashing in 2008. Court documents show that Wells Fargo asked the jury be instructed to avoid using hindsight; Minnesota law establishes that trustee’s must be judged based on the facts at the time without the benefit of knowing what would occur after.
The jury agreed with Wells Fargo, and the court’s full written findings are scheduled to be submitted on August 29.
In 2010, Wells Fargo lost a similar case in Minnesota state court to a group of four nonprofits led by the Minnesota Workers’ Compensation Reinsurance Association. As a result, the bank ended up paying over $57 million including recovery costs, interest and attorney fees.
Three other cases against Wells Fargo’s securities lending activities are pending in Minnesota.
Wells Fargo assumed the securities lending program in question after acquiring Wachovia in 2008. The program was rebranded as ClearLend in 2010 and then sold to Citibank a year later, though Wells Fargo is still responsible for any litigation related to their period of ownership.
Federal Jury Finds Wells Fargo Not Liable for Securities Lending Losses
Five years later, litigation stemming from the financial crisis continues to unfold, as a federal court jury in St. Paul, Minnesota cleared Wells Fargo of liability for losses incurred by Blue Cross Blue Shield of Minnesota and other institutional investors.
« Capita Financial Group Appointed Fund Administrator For New PAIF