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Wells Fargo wins dismissal of shareholder lawsuit over commercial lending -Breaking

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© Reuters. FILE PHOTO A Wells Fargo logo can be seen in New York City on January 10, 2017, U.S.A. REUTERS/Stephanie Keith

Jonathan Stempel

(Reuters] – Friday’s dismissal by a federal judge of class-action lawsuits. Wells Fargo (NYSE:) & Co, the fourth-largest U.S. bank, misled or defrauded shareholders about its commercial loans.

U.S. District Judge William Alsup of San Francisco stated that shareholders did not adequately claim Wells Fargo had unjustifiably inflated the quality and loss reserves, or misled them about its lending practices.

As Wells Fargo’s San Francisco-based bank gradually exposed the “previously unknown level of risk” with its commercial loans, shareholders claimed they had lost billions in Wells Fargo stock.

The proposed class is for shareholders of Wells Fargo in the 3 years ended Oct. 13, 2020. This was a time when Wells Fargo’s stock price dropped 54%.

However, the judge found that Wells Fargo underwriting standards “proved to be largely accurate and conservative, not inflationary” and that it did not deceive shareholders regarding the amount of loans relative the business value.

Alsup was unable to determine whether Wells Fargo had intended to defraud anybody, as he didn’t find any false or misleading statements.

According to him, the Shareholders, headed by the Employees Retirement System of Hawaii could file an amended case in order to correct any deficiencies.

The shareholders’ lawyers did not respond immediately to inquiries for comment. Similar requests were not answered by Wells Fargo or its lawyers.

Wells Fargo operates under consent orders issued by the Federal Reserve and other U.S. regulators since 2018 to increase governance and oversight. Additionally, $1.95 Trillion was set as the maximum bank assets by the Fed.

Many have criticized the bank’s practices, including opening accounts without customers permission and charging borrowers to purchase auto insurance that they don’t require.

The case is Employees’ Retirement System of the State of Hawaii v. Wells Fargo & Co, U.S. District Court, Northern District of California, No. 20-07674.

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