Wells Fargo Beats Class Action Alleging Self-Dealing and Favoring its Own Funds
Wells Fargo scored a win in the courts when a panel of judges upheld a previous decision to dismiss a lawsuit accusing the firm of steering its employees to proprietary products, according to Law360.com.
Last week, the Eighth Circuit upheld a decision reached by a Minnesota federal judge to throw out the proposed class action brought in 2016 by John Meiners, which accused Wells Fargo of steering billions of dollars in its workers’ retirement accounts into its own target-date funds when better options were allegedly available, the legal news website writes.
Meiners had argued the company should have put employee savings into a Vanguard fund instead, according to Law360.com. U.S. District Judge David Doty dismissed the suit last year, arguing the Vanguard fund and the Wells Fargo funds used different strategies and therefore couldn’t be compared, the website writes. And in its decision last week, the Eighth Circuit panel found that the complaint failed to demonstrate that the company’s 12 funds were inappropriate, according to Law360.com.
“The fact that one fund with a different investment strategy ultimately performed better does not establish anything about whether the Wells Fargo TDFs were an imprudent choice at the outset,” the court wrote Friday, according to the website.
The panel also said Meiners failed to demonstrate that Wells Fargo, by putting employees into its own products, engaged in self-dealing, Law360.com writes.
The decision clears Wells Fargo of charges that it breached its fiduciary duty under the Employee Retirement Income Security Act, the website writes. Wells Fargo says in a statement cited by Law360.com that it’s pleased with the court’s decision. Lawyers for parties involved in the suit didn’t respond to the website’s request for comment.
Meanwhile, Citigroup has just settled a $6.9 million lawsuit accusing the firm of breaching its fiduciary duty in its 401(k) plan, InvestmentNews writes. First filed in 2007 in the U.S. District Court for the Southern District of New York, the suit claimed Citigroup put its workers’ retirement savings into allegedly expensive and underperforming investments overseen by Citigroup and its affiliates Smith Barney and Salomon Brothers, according to the publication.
Citigroup didn’t admit wrongdoing as part of the settlement, which still needs a judge’s approval, InvestmentNews writes. The class action applies to those invested in one of Citigroup’s nine in-house funds from October 2001 to December 2005, according to the publication. A Citigroup spokesman declined comment to InvestmentNews.