A district court judge in Minnesota has ruled that Wells Fargo & Co. must pay four Minnesota nonprofits $15 million or more in costs, fees, and interests for breach of fiduciary and securities fraud. The investment bank has already been slapped with a $29.9 million verdict in this case against plaintiffs the Minnesota Medical Foundation, the Minneapolis Foundation, the Minnesota Workers’ Compensation Reinsurance Association, and the Robins Kaplan Miller & Ciresi Foundation for Children.
Judge M. Michael Monahan, in his order filed on Wednesday, scolded Wells Fargo for its “management complacency, if not hubris” that led to investment losses for clients of its securities-lending investment program. He said that he agreed with the jury’s key findings that the financial firm failed to fully disclose that it was revising the program’s risk profile, impartially favored certain participants, and advanced the interest of borrowing brokers. Monahan said that it was evident that Wells Fargo knew of the increased risks it was adding to the securities lending program and that its line managers did not reasonably manage these, which increased the chances that plaintiffs would suffer financial huge harm.
Monahan noted that because Minneapolis litigator Mike Ciresi provided a “public benefit” by revealing the investment bank’s wrongdoing, Wells Fargo has to pay plaintiffs’ legal fees, which Ciresi’s law firm says is greater than $15 million. Also, the financial firm has to give back to the Minnesota nonprofits an unspecified figure in fees (plus interest) that it charged for managing the investment program, in addition to interest going as far back as 2008 on the $29.9 million verdict.
Monahan also overturned the part of the jury verdict that was in Wells Fargo’s favor and is ordering a new trial regarding allegations that the investment bank improperly seized $1.6 million from a bond account of children’s charity as the lending program was failing. The district judge, however, denied the plaintiffs’ motion for a new trial to determine punitive damages.
Judge unloads on Wells Fargo with order on investment program, Poten.com, December 24, 2010
Wells Fargo ordered to pay $30 million for fraud, Star Tribune, June 2, 2010
Wells Fargo to Pay $30M in Compensatory Damages to Four Nonprofits for Securities Fraud, Stockbroker Fraud Blog, June 3, 2010
Continue Reading ›