Wells Fargo is paying $131.8 million to 401(k) participants to settle a probe by the DOL.
The DOL said it found that the plan overpaid for company stock purchased between 2013 and 2018.
Wells Fargo said it “strongly disagrees” with the allegations.
Wells Fargo is paying $131.8 million to 401(k) participants after an investigation found that the plan overpaid for company stock purchased between 2013 and 2018.
The Department of Labor announced on Monday that it had reached a settlement with Wells Fargo and GreatBanc Trust Company, the fund’s administrator, that would give more than $131.8 million to the retirement plan’s affected current and former participants.
Wells Fargo also agreed to pay a penalty of nearly $13.2 million as part of the settlement.
Wells Fargo and GreatBanc didn’t admit or deny the allegations as part of the settlement, the DoL said, though Wells Fargo said in a statement Monday that it “strongly disagrees” with the allegations.
The DoL said its investigation found that Wells Fargo and GreatBanc Trust Company caused the 401(k) plan to pay between $1,033 and $1,090 per share for Wells Fargo preferred stock, but that this was converted to just $1,000 in common stock when allocated to participants.
The plan borrowed money from Wells Fargo to purchase the preferred stock between 2013 and 2018, the DoL found.
“Our investigation found those responsible for Wells Fargo’s 401(k) plan paid more than fair market value for employer stock and, by doing so, betrayed the trust of the plan’s current and future retirees,” Labor Secretary Marty Walsh said in a press release.
The DoL also said that Wells Fargo used the dividends paid on the preferred shares to repay the stock purchase loans.
As well as making the payment 401(k) plan participants and paying the penalty, Wells Fargo will redeem the remaining convertible preferred stock for common stock and will stop using dividends from the convertible preferred shares to repay the stock purchase loans, the DoL said.
GreatBanc will also have restrictions on when it can act as a fiduciary to public companies in connection with future leveraged transactions involving an employee stock-ownership plan, the DoL said.
Wells Fargo said that it believed it followed applicable laws when conducting the transactions. It said that an independent third-party had approved the transactions and confirmed that the 401(k) plan didn’t pay more than fair market value for company stock.
“Though the Company disagrees with the DoL’s allegations and has not conducted these transactions since 2018, Wells Fargo believes resolving this legacy matter is in the best interest of the Company,” it added.
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