A U.S. judge has ordered Wells Fargo (WFC.N) to face a lawsuit alleging it misled shareholders by claiming a commitment to hiring diversity, while allegedly conducting sham interviews with non-white and female candidates who were not seriously considered for the roles.
U.S. District Judge Trina Thompson in San Francisco, who had previously dismissed the lawsuit last August, has now identified both direct and indirect evidence suggesting the bank intended to deceive shareholders about its hiring practices.
She dismissed arguments that there was insufficient proof of the widespread nature of fake interviews or that top executives, including CEO Charles Scharf, were unaware of the practices.
Shareholders have contested 11 statements made by the bank, highlighting the success of a policy adopted in March 2020, which mandated that at least 50% of candidates interviewed for jobs paying $100,000 or more be from minority groups, women, or other disadvantaged groups.
They presented evidence, including interviews with former employees, an internal whistleblower email, and the abrupt retirement of a senior wealth manager accused of pressuring the whistleblower into conducting fake interviews.
“The employee-submitted complaints, the peculiar timing of [the manager’s] departure, and defendants’ demonstrated focus on diversity issues support a strong inference of [fraudulent intent] that is cogent and at least as compelling as an opposing inference that defendants remained oblivious,” Thompson wrote.
In response, Wells Fargo stated that it would continue to defend against the lawsuit, noting that the Department of Justice and the Securities and Exchange Commission had closed investigations into its hiring practices without taking action.
“Wells Fargo is deeply dedicated to diversity, equity, and inclusion and does not tolerate discrimination in any part of our business,” the bank added.
The fourth-largest U.S. bank has faced numerous complaints and public scrutiny over its business practices since 2016 and is still under a Federal Reserve cap on asset growth.
In June 2022, Wells Fargo’s share price dropped by 10.2%, erasing over $17 billion in market value, following a New York Times report on the Justice Department’s investigation.
The case is SEB Investment Management AB et al v Wells Fargo & Co, U.S. District Court, Northern District of California, No. 22-03811.