Wells Fargo Settles Minnesota-Filed Class Action Lawsuit

Wells Fargo has settled a class action lawsuit brought against it by a Michigan-based retirement system in 2010.

The parties reached resolution on the eve of the trial, with Jury selection scheduled to start on April 14, 2014, reports Bloomberg.

The City of Farmington Hills Employees Retirement System filed the suit in 2010, claiming the bank touted a high-risk securities lending program it claimed was safe. The System alleges that the bank breached its fiduciary duty by investing in these securities. The class action dates back to 2006 and was subject to a statute of limitations. The securities lending program existed for more than 25 years prior to that time.

According to the Bloomberg report, the plaintiffs’ attorney Peter Binkow told U.S. District Judge Donavan Frank that the parties had reached resolution over the weekend.

The report adds that Frank had scheduled a June 5 hearing at which the parties will present a detailed settlement proposal to him for preliminary approval.

Specifically, the retirement system’s argument was that Wells Fargo failed to ensure that the collateral funds were invested in safe, liquid, short-term investments, and instead improperly invested proceeds in high-risk, long-term securities. Further, the fund argues that Wells Fargo systematically obscured the effects of its mismanagement by concealing investment performance information from the class members in order to prevent them from exiting the securities lending program. The plaintiff had the following six counts against Wells Fargo: Breach of Fiduciary Duty, Breach of Contract, Violation of Minnesota Prevention of Consumer Fraud Act, Unlawful Trade Practices, Deceptive Trade practices and civil theft.

Wells Fargo denied those claims, and in an emailed statement said: “Wells Fargo was focused at all times on serving our clients’ interests and worked very hard and responsibly to achieve the best results for all participants in the securities lending program during extremely difficult economic conditions. Our conservative approach was effective, as the plaintiffs in Wells Fargo securities lending program had losses averaging approximately three percent at the same time that the markets were down up to 50 percent during the height of the financial crisis.”

The plaintiff in the class action suit is the City of Farmington Hills Employees Retirement System while the defendant is Wells Fargo Bank. The suit, No. 10-4372, was filed in the U.S. District Court for the District of Minnesota.