SAN FRANCISCO (CN) — Arguing for the dismissal of misrepresentation claims relating to its hiring practices in federal court Tuesday afternoon, Wells Fargo said there is no evidence that its officers acted with intent to defraud or knew about the company conducting fake job interviews.
A class of plaintiffs who are former investors of Wells Fargo sued the bank in 2022, claiming that it conducted fake job interviews to get around the company’s diversity guidelines. After the New York Times published a story detailing the sham interviews, Wells Fargo’s common stock price plummeted, causing the investors to suffer significant losses and damages.
Leonid Traps, counsel for Wells Fargo, told Thompson that the amended complaint — submitted after U.S. District Judge Trina Thompson, previously allowed misrepresentation claims to survive against Wells Fargo’s board in 2024 but dismissed the claims against the Wells Fargo officers in September 2024 — does not contain any new facts against the officers.
The attorney added that the complaint should be dismissed with prejudice because the plaintiffs have still not pleaded that the Wells Fargo officers knowingly made statements to defraud anyone.
Any inconsistencies or differences in statements made by directors and officers of Wells Fargo can be explained by the officers and directors not having the same information, Traps said.
“There are no allegations that the directors and officers knew the same things, nor that they made the same statements at the same time. The allegations as to what the directors knew were separate from what the allegations are as to what the officers knew,” he said.
Traps also said the amended complaint did not address demand futility — a legal principle that allows a shareholder to avoid the requirement of demanding that a corporation’s board of directors bring a lawsuit on their behalf. It applies when a demand would be pointless or rejected by the board, or if the board is involved in the reported wrongdoing.
Gia Jung, counsel for the investors, told Thompson that the amended complaint “unequivocally” addressed demand futility.
“When we amended we made sure to make clear on the face of the pleadings that a demand on the board as to the claims against the officer defendants would have been futile. The discriminatory hiring statements that this court has already found to be actionable against the board completely overlap and are nearly identical to the statements that underlie the securities claims against the officer defendants,” Jung said. “A demand on the board as to any of the alleged claims against the officer defendants would be futile, because the board would be conflicted.”
Thompson, a Joe Biden appointee, asked Jung what was in the amended complaint that could change her mind about her previous order dismissing the claims against the officers.
Jung replied that the false statements of both the directors and officers implicate and are intertwined with liability allegations.
“And so here we’re tying those as it relates to the board with those that relate to the officer defendants,” Jung said.
Thompson took the matter under submission.
The plaintiffs had argued previously that Wells Fargo executives knew about the practice of fake interviews and did not do anything to address them even after the New York Times story was published, so the company’s statements made in reports and notices filed with the Securities Exchange Commission and press releases, which emphasized the company’s commitment to improving workforce diversity, were materially false.
Wells Fargo’s 2020 diversity guidelines required that at least 50% of candidates interviewed for positions that have salaries of more than $100,000 a year come from an underrepresented racial, ethnic or gender group or were veterans, people with disabilities or members of the LGBTQ community.