Wells Fargo Sued Over 401(k) Stock After Labor Department Deal

Wells Fargo & Co. continues to face scrutiny over the company stock held by its 401(k) plan, with a federal lawsuit by plan participants coming two weeks after the Labor Department announced a settlement of more than $131 million.

The proposed class action claims plan participants overpaid for the Wells Fargo preferred stock in their retirement accounts for more than a decade. With the help of plan trustee GreatBanc Trust Co., Wells Fargo used the dividend income from this preferred stock to make its required employer contributions to the plan, causing plan participants to miss out on more than $400 million that should have gone to them, according to the complaint.

“Wells Fargo stole from the Plan and its own employees, and GreatBanc, which was charged with protecting participants’ interests, aided and abetted this theft,” plaintiff Lawrence Beville said in the complaint.

The lawsuit, filed Monday in the US District Court for the District of Minnesota, comes two weeks after the Labor Department announced a settlement in its investigation into the matter. The deal requires Wells Fargo to pay more than $131.8 million to plan participants, along with a penalty of about $13 million. And it limits GreatBanc’s ability to act as a fiduciary to a public company in connection with any future leveraged transactions involving an employee stock plan.

But according to Beville, the money recovered by the Labor Department is “far less” than what Wells Fargo improperly took from the plan.

Wells Fargo declined to comment on the lawsuit. In a news release issued in connection with the DOL settlement, the company said it believes it followed applicable laws in conducting the transactions, which were independently approved by a third party.

GreatBanc, which didn’t immediately respond to a request for comment, also said in a news release that it believed the transactions were legal and appropriate.

Causes of Action: Prohibited transactions and fiduciary breach in violation of the Employee Retirement Income Security Act.

Relief: Declaration of fiduciary breach and prohibited transactions, restoration of plan losses, accounting of profits, surcharge, removal of breaching fiduciaries, disgorgement, interest, costs, and attorneys’ fees.

Potential Class Size: Thousands of participants in the Wells Fargo 401(k) plan who invested in the employer stock fund since 2016.

Attorneys: Nichols Kaster PLLP, Bailey & Glasser LLP, and Feinberg, Jackson, Worthman & Wasow LLP represent the proposed class.

The case is Beville v. GreatBanc Tr. Co., D. Minn., No. 0:22-cv-02354, complaint 9/26/22.