Ma v. Wells Fargo & Company, N.D. Cal. No. 3:20-cv-03697, docket and complaint (JPML MDL No. 2954, Doc. 1-11)
Summary
Securities class action complaint filed June 4, 2020 in the Northern District of California, case 3:20-cv-03697, by Guofeng Ma against Wells Fargo & Company, Charles W. Scharf and John R. Shrewsberry, as filed with the JPML in MDL No. 2954. It covers buyers of Wells Fargo securities between April 5, 2020 and May 5, 2020. The complaint recounts that on April 5, 2020 Wells Fargo said it was targeting $10 billion in Paycheck Protection Program loans, and that on April 8, 2020 the Federal Reserve let it exceed the 2018 asset cap to lend more under the PPP. It alleges the defendants made false and misleading statements during the class period. These are allegations.
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Cited in: How Much Did Wells Fargo Make From Pandemic Relief? · Charlie Scharf
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“Ma v. Wells Fargo & Company, N.D. Cal. No. 3:20-cv-03697, docket and complaint (JPML MDL No. 2954, Doc. 1-11).”
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Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 1 of 19
1 POMERANTZ LLP
Jennifer Pafiti (SBN 282790)
2 1100 Glendon Avenue, 15th Floor
Los Angeles, California 90024
3
Telephone: (310) 405-7190
4 jpafiti@pomlaw.com
5 Attorney for Plaintiff
6 [Additional Counsel on Signature Page]
7
8
UNITED STATES DISTRICT COURT
9 NORTHERN DISTRICT OF CALIFORNIA
10
GUOFENG MA, Individually and On Case No.
11 Behalf of All Others Similarly Situated,
12 CLASS ACTION
Plaintiff,
13 COMPLAINT FOR VIOLATIONS OF THE
v. FEDERAL SECURITIES LAWS
14
DEMAND FOR JURY TRIAL
15 WELLS FARGO & COMPANY,
CHARLES W. SCHARF, and JOHN R.
16 SHREWSBERRY,
17 Defendants.
18
19
20
21
22
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24
25
26
27
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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 2 of 19
1 Plaintiff Guofeng Ma (“Plaintiff”), individually and on behalf of all other persons similarly
2 situated, by Plaintiff’s undersigned attorneys, for Plaintiff’s complaint against Defendants, alleges
3
the following based upon personal knowledge as to Plaintiff and Plaintiff’s own acts, and
4
information and belief as to all other matters, based upon, inter alia, the investigation conducted
5
by and through Plaintiff’s attorneys, which included, among other things, a review of the
6
Defendants’ public documents, conference calls and announcements made by Defendants, United
7
8 States (“U.S.”) Securities and Exchange Commission (“SEC”) filings, wire and press releases
9 published by and regarding Wells Fargo & Company (“Wells Fargo” or the “Company”), analysts’
10 reports and advisories about the Company, and information readily obtainable on the Internet.
11
Plaintiff believes that substantial evidentiary support will exist for the allegations set forth herein
12
after a reasonable opportunity for discovery.
13
NATURE OF THE ACTION
14
15 1. This is a federal securities class action on behalf of a class consisting of all persons
16 other than Defendants who purchased or otherwise acquired Wells Fargo securities between April
17 5, 2020 and May 5, 2020, both dates inclusive (the “Class Period”), seeking to recover damages
18 caused by Defendants’ violations of the federal securities laws and to pursue remedies under
19
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule
20
10b-5 promulgated thereunder, against the Company and certain of its top officials.
21
2. Wells Fargo is a diversified financial services company that provides banking,
22
23 investment, mortgage, and consumer and commercial finance products and services to individuals,
24 businesses, and institutions in the U.S. and internationally.
25 3. On April 5, 2020, Wells Fargo announced that it had received strong interest in the
26
Paycheck Protection Program (“PPP”), a program under the Coronavirus Aid, Relief, and
27
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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 3 of 19
1 Economic Security Act (the “CARES Act”), and was targeting to distribute a total of $10 billion
2 to small business customers under the requirements of the PPP.
3
4. On April 8, 2020, the Federal Reserve announced that it would allow Wells Fargo
4
to exceed the asset cap that it had imposed on Wells Fargo in 2018 after revelations that the
5
Company had opened millions of accounts in customers’ names without their permission, a change
6
which would allow Wells Fargo to make additional small business loans as part of the PPP.
7
8 5. That same day, Wells Fargo issued a press release stating, in relevant part, that,
9 “beginning immediately, in response to the actions by the Federal Reserve, [Wells Fargo] will
10 expand its participation in the [PPP] and offer loans to a broader set of its small business and
11
nonprofit customers subject to the terms of the program.”
12
6. Throughout the Class Period, Defendants made materially false and misleading
13
statements regarding the Company’s business, operational and compliance policies. Specifically,
14
15 Defendants made false and/or misleading statements and/or failed to disclose that: (i) Wells Fargo
16 planned to, and did, improperly allocate government-backed loans under the PPP, and/or had
17 inadequate controls in place to prevent such misallocation; (ii) the foregoing foreseeably increased
18 the Company’s litigation risk with respect to PPP allocation, as well as increased regulatory
19
scrutiny and/or potential enforcement actions; and (iii) as a result, the Company’s public
20
statements were materially false and misleading at all relevant times.
21
7. On April 19, 2020, after at least one lawsuit was filed against the Company, reports
22
23 emerged that Wells Fargo may have unfairly allocated government-backed loans under the PPP.
24 For example, USA Today reported that “[t]he lawsuit filed on behalf of small business owners on
25 Sunday alleges that Wells Fargo unfairly prioritized businesses seeking large loan amounts, while
26
the government’s small business agency has said that PPP loan applications would be processed
27
on a first-come, first-served basis.” According to the lawsuit, “[t]he move by Wells Fargo meant
28
2
CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 4 of 19
1 that the bank would receive millions more dollars in processing fees,” and, “[m]aking matters
2 worse, Wells Fargo concealed from the public that it was reshuffling the PPP applications it
3
received and prioritizing the applications that would make the bank the most money.”
4
8. Following this news, Wells Fargo’s stock price fell more than 5% over two trading
5
days to close at $26.84 per share on April 21, 2020.
6
9. Finally, on May 5, 2020, Wells Fargo filed a quarterly report on Form 10-Q with
7
8 the SEC, disclosing, in addition to multiple PPP-related lawsuits initiated against the Company,
9 that Wells Fargo had “received formal and informal inquiries from federal and state governmental
10 agencies regarding its offering of PPP loans.”
11
10. Following this news, Wells Fargo’s stock price fell by more than 6% over two
12
trading days from its closing price on May 4, 2020, closing at $25.61 per share on May 6, 2020.
13
11. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline
14
15 in the market value of the Company’s securities, Plaintiff and other Class members have suffered
16 significant losses and damages.
17 JURISDICTION AND VENUE
18 12. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of
19
the Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the
20
SEC (17 C.F.R. § 240.10b-5).
21
13. This Court has jurisdiction over the subject matter of this action pursuant to 28
22
23 U.S.C. § 1331 and Section 27 of the Exchange Act.
24 14. Venue is proper in this Judicial District pursuant to Section 27 of the Exchange Act
25 (15 U.S.C. § 78aa) and 28 U.S.C. § 1391(b). Wells Fargo is headquartered in this Judicial District,
26
Defendants conduct business in this Judicial District, and a significant portion of Defendants’
27
activities took place within this Judicial District.
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3
CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 5 of 19
1 15. In connection with the acts alleged in this complaint, Defendants, directly or
2 indirectly, used the means and instrumentalities of interstate commerce, including, but not limited
3
to, the mails, interstate telephone communications, and the facilities of the national securities
4
markets.
5
PARTIES
6
16. Plaintiff, as set forth in the attached Certification, acquired Wells Fargo securities
7
8 at artificially inflated prices during the Class Period and was damaged upon the revelation of the
9 alleged corrective disclosures.
10 17. Defendant Wells Fargo is a Delaware corporation with principal executive offices
11
located at 420 Montgomery Street, San Francisco, California 94104. Wells Fargo common stock
12
trades in an efficient market on the New York Stock Exchange (“NYSE”) under the ticker symbol
13
“WFC.”
14
15 18. Defendant Charles W. Scharf (“Scharf”) has served as Wells Fargo’s Chief
16 Executive Officer at all relevant times.
17 19. Defendant John R. Shrewsberry (“Shrewsberry”) has served as Wells Fargo’s Chief
18 Financial Officer at all relevant times.
19
20. Defendants Scharf and Shrewsberry are sometimes referred to herein as the
20
“Individual Defendants.”
21
21. The Individual Defendants possessed the power and authority to control the
22
23 contents of Wells Fargo’s SEC filings, press releases, and other market communications. The
24 Individual Defendants were provided with copies of Wells Fargo’s SEC filings and press releases
25 alleged herein to be misleading prior to or shortly after their issuance and had the ability and
26
opportunity to prevent their issuance or to cause them to be corrected. Because of their positions
27
with Wells Fargo, and their access to material information available to them but not to the public,
28
4
CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 6 of 19
1 the Individual Defendants knew that the adverse facts specified herein had not been disclosed to
2 and were being concealed from the public, and that the positive representations being made were
3
then materially false and misleading. The Individual Defendants are liable for the false statements
4
and omissions pleaded herein.
5
22. Wells Fargo and the Individual Defendants are sometimes collectively referred to
6
herein as “Defendants.”
7
8 SUBSTANTIVE ALLEGATIONS
9 Background
10 23. Wells Fargo is a diversified financial services company that provides banking,
11
investment, mortgage, and consumer and commercial finance products and services to individuals,
12
businesses, and institutions in the U.S. and internationally.
13
24. Following the onset of the COVID-19 pandemic, the U.S. federal government
14
15 passed the CARES Act, which, among other things, set forth the PPP in an effort to aid small
16 businesses during the economic downturn that resulted from the pandemic. Funded by the U.S.
17 Small Business Administration (“SBA”), the PPP authorizes up to $349 billion in forgivable loans
18 to small businesses to pay their employees during the COVID-19 crisis. All businesses—including
19
nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed
20
individuals, and independent contractors—with 500 or fewer employees are eligible to apply for
21
PPP loans.
22
23 Materially False and Misleading Statements Issued During the Class Period
24 25. The Class Period begins on April 5, 2020, when Wells Fargo issued a press release
25 entitled “Wells Fargo Receives Strong Interest in the Paycheck Protection Program (PPP)” (the
26
“April 5, 2020 Press Release”). At the top of that press release, Wells Fargo highlighted the
27
following three points: (i) “Intake from customers indicates Wells Fargo has reached its capacity
28
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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 7 of 19
1 of $10 billion to lend under the PPP”; (ii) “Will focus lending to nonprofits and small businesses
2 with fewer than 50 employees”; and (iii) “Will give fees received under program to nonprofits
3
focused on small business.”
4
26. In the body of the April 5, 2020 Press Release, Defendants represented that “Wells
5
Fargo . . . is targeting to distribute a total of $10 billion to small business customers under the
6
requirements of the PPP and will focus on serving two segments of its customer population:
7
8 nonprofits and small businesses with fewer than 50 employees”; that “[t]he company has received
9 forms from customers expressing interest in the PPP that it expects will fill the company’s capacity
10 to lend under the program, as it continues to operate under existing asset cap limitations”; that
11
“fees generated through the program will be distributed as charitable grants to nonprofits that
12
support small businesses, which is a focus of Wells Fargo’s philanthropic efforts”; and that “Wells
13
Fargo will review all expressions of interest submitted by customers via [its] online form through
14
15 April 5 and provide them with updates in the coming days.”
16 27. The April 5, 2020 Press Release also quoted Defendant Scharf, who touted, in
17 relevant part, that “[s]ince the beginning of this health crisis, Wells Fargo has provided substantial
18 credit and liquidity to [its] customers to help them weather these uncertain times”; that, “[i]n the
19
month of March alone, [Defendants] extended nearly $70 billion in new and increased
20
commitments and outstanding loans to customers including consumers, small businesses, and
21
companies in the US”; and that Defendants “are focusing [their] efforts under the [PPP]” on “small
22
23 businesses with fewer than 50 employees and nonprofits [that] often have fewer resources.”
24 28. With specific respect to Wells Fargo’s regulatory compliance, Defendant Scharf
25 assured investors that “[s]ince [he] arrived at the company, [he] ha[s] been clear that [Defendants]
26
will direct all resources necessary to do the work required by . . . regulators and [Defendants] are
27
in the process of doing so.”
28
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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 8 of 19
1 29. On April 8, 2020, the Federal Reserve announced that it would allow Wells Fargo
2 to exceed the asset cap that it had imposed on the Company in 2018. The asset cap had been
3
imposed under a consent order after revelations that the Company had opened millions of accounts
4
in customers’ names without their permission. The Federal Reserve’s permission to exceed the
5
asset cap would allow Wells Fargo to make additional small business loans as part of the PPP.
6
30. That same day, Wells Fargo issued a press release entitled “Wells Fargo to Expand
7
8 Participation in the Paycheck Protection Program (PPP)” (the “April 8, 2020 Press Release”). That
9 press release touted, in relevant part, that “beginning immediately, in response to the actions by
10 the Federal Reserve, [Wells Fargo] will expand its participation in the [PPP] and offer loans to a
11
broader set of its small business and nonprofit customers subject to the terms of the program”
12
(emphasis added).
13
31. The April 8, 2020 Press Release also quoted Defendant Scharf, who asserted, in
14
15 relevant part, that “[w]hile [Defendants] are pleased to be able to help more small businesses
16 through the [PPP], [they] note that the Federal Reserve’s action does not – and should not – in any
17 way relieve [Defendants] of [their] obligations under the consent order”; that he has “said
18 consistently since arriving at Wells Fargo that management has the responsibility to do the work
19
necessary under the consent order”; that “[t]he consent order exists because of deficiencies that
20
have existed at Wells Fargo for years”; that “[t]he work required under the consent order is clear,
21
has been outstanding for too long, and is a prerequisite for consideration of the asset cap being
22
23 lifted”; that “work on [Defendants’] consent orders is [their] top priority and [they] are devoting
24 all necessary resources”; and that “[u]ntil [their] work is completed to the Federal Reserve’s
25 satisfaction, [Defendants] will continue to actively make decisions on how to allocate [their]
26
balance sheet to support the needs of [their] customers under the existing asset cap.” All the
27
foregoing plainly signaled to investors that, in light of prior violations by the Company,
28
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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 9 of 19
1 Defendants were taking their remediation efforts to comply with relevant regulatory requirements
2 seriously, and that Defendants were actively ensuring the future compliance of the Company with
3
all necessary requirements.
4
32. On April 14, 2020, Wells Fargo hosted an earnings call with investors and analysts
5
to discuss the Company’s performance in the first quarter of 2020. On the call, Defendant Scharf
6
touted, in relevant part, that Defendants “extended [their] participation in the PPP program and
7
8 hope to provide significant relief to [their] small business customers”; that Defendants “are quickly
9 ramping up [their] processing capacity to respond to the significant demand [they]’ve seen”; that,
10 “[t]hrough April 10, [they]’ve received more than 370,000 . . . indications of interest from [their]
11
customers”; and that Defendants “are working with industry groups and the US Treasury in
12
preparation to distribute millions of economic impact payments to Americans as quickly as
13
possible.”
14
15 33. The statements referenced in ¶¶ 25-28 and 30-32 were materially false and
16 misleading because Defendants made false and/or misleading statements, as well as failed to
17 disclose material adverse facts about the Company’s business, operational and compliance
18 policies. Specifically, Defendants made false and/or misleading statements and/or failed to
19
disclose that: (i) Wells Fargo planned to, and did, improperly allocate government-backed loans
20
under the PPP, and/or had inadequate controls in place to prevent such misallocation; (ii) the
21
foregoing foreseeably increased the Company’s litigation risk with respect to PPP allocation, as
22
23 well as increased regulatory scrutiny and/or potential enforcement actions; and (iii) as a result, the
24 Company’s public statements were materially false and misleading at all relevant times.
25 The Truth Begins to Emerge
26
34. On April 19, 2020, after at least one lawsuit was filed against the Company, reports
27
emerged that Wells Fargo unfairly allocated government-backed loans under the PPP. For
28
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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 10 of 19
1 example, USA Today reported that “[t]he lawsuit filed on behalf of small business owners on
2 Sunday alleges that Wells Fargo unfairly prioritized businesses seeking large loan amounts, while
3
the government’s small business agency has said that PPP loan applications would be processed
4
on a first-come, first-served basis.” The article continued by noting that, according to the lawsuit,
5
“[t]he move by Wells Fargo meant that the bank would receive millions more dollars in processing
6
fees,” and, “[m]aking matters worse, Wells Fargo concealed from the public that it was reshuffling
7
8 the PPP applications it received and prioritizing the applications that would make the bank the
9 most money.”
10 35. Class Actions Reporter, a daily e-newsletter dedicated to reporting on class actions,
11
also discussed the lawsuit, and cited prior statements by Wells Fargo, noting that the Company’s
12
conduct may have violated the CARES Act:
13
The complaint quotes the text of the bill as saying, “[T]he Administrator should
14 issue guidance to lenders and agents to ensure that the processing and disbursement
15 of covered loans prioritizes small business concerns and entities in the underserved
and rural markets, including veterans and members of the military community,
16 small business concerns owned and controlled by socially economically
disadvantaged individuals…, women, and business in operation for less than 2
17 years.”
18 Wells Fargo claimed to back this priority. The complaint quotes its CEO as saying,
19 “While all businesses have been impacted by this crisis, small businesses with
fewer than 50 employees and nonprofits often have fewer resources. Therefore, we
20 are focusing our efforts under the Paycheck Protection Program on these groups.”
21 However, the complaint alleges that this was not how Wells Fargo handled the
applications it received: “Wells Fargo prioritized and front-loaded applications
22
with higher loan amounts. This shown by comparing data from loans processed
23 between April 3, 2020 (when the PPP started) and April 13th and April 16th (when
the program ran out of money).”
24
According to the complaint, Wells Fargo did this because it earned higher fees on
25 those loans.
26
Wells Fargo’s words matters, the complaint says, because small businesses were
27 entitled to apply only for one loan. If they applied with one bank, they could not
then submit another application with another. Had they known that Wells Fargo
28 would prioritize larger businesses, they would have applied with a different lender.
9
CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 11 of 19
1
36. Following this news, Wells Fargo’s stock price fell more than 5% over two trading
2
days to close at $26.84 per share on April 21, 2020.
3
4 37. Finally, on May 5, 2020, Wells Fargo filed a quarterly report on Form 10-Q with
5 the SEC, reporting the Company’s financial and operating results for the first quarter of its fiscal
6 year 2020. In addition to noting that “[p]laintiffs have filed putative class actions in state and
7
federal court in Texas, California, and Colorado against the Company,” which seek “damages and
8
injunctive relief related to the Company’s offering of [PPP] loans under the [CARES] Act,” the
9
quarterly report disclosed that “[t]he Company has also received formal and informal inquiries
10
11 from federal and state governmental agencies regarding its offering of PPP loans” (emphasis
12 added).
13 38. Following this news, Wells Fargo’s stock price fell by more than 6% over two
14 trading days from its closing price on May 4, 2020, closing at $25.61 per share on May 6, 2020.
15
39. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline
16
in the market value of the Company’s securities, Plaintiff and other Class members have suffered
17
significant losses and damages.
18
19 PLAINTIFF’S CLASS ACTION ALLEGATIONS
20 40. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
21 Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or otherwise
22
acquired Wells Fargo securities during the Class Period (the “Class”); and were damaged upon the
23
revelation of the alleged corrective disclosures. Excluded from the Class are Defendants herein,
24
the officers and directors of the Company, at all relevant times, members of their immediate
25
families and their legal representatives, heirs, successors or assigns and any entity in which
26
27 Defendants have or had a controlling interest.
28
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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 12 of 19
1 41. The members of the Class are so numerous that joinder of all members is
2 impracticable. Throughout the Class Period, Wells Fargo securities were actively traded on the
3
NYSE. While the exact number of Class members is unknown to Plaintiff at this time and can be
4
ascertained only through appropriate discovery, Plaintiff believes that there are hundreds or
5
thousands of members in the proposed Class. Record owners and other members of the Class may
6
be identified from records maintained by Wells Fargo or its transfer agent and may be notified of
7
8 the pendency of this action by mail, using the form of notice similar to that customarily used in
9 securities class actions.
10 42. Plaintiff’s claims are typical of the claims of the members of the Class as all
11
members of the Class are similarly affected by Defendants’ wrongful conduct in violation of
12
federal law that is complained of herein.
13
43. Plaintiff will fairly and adequately protect the interests of the members of the Class
14
15 and has retained counsel competent and experienced in class and securities litigation. Plaintiff has
16 no interests antagonistic to or in conflict with those of the Class.
17 44. Common questions of law and fact exist as to all members of the Class and
18 predominate over any questions solely affecting individual members of the Class. Among the
19
questions of law and fact common to the Class are:
20
• whether the federal securities laws were violated by Defendants’ acts as alleged
21 herein;
22
• whether statements made by Defendants to the investing public during the Class
23 Period misrepresented material facts about the business, operations and
management of Wells Fargo;
24
• whether the Individual Defendants caused Wells Fargo to issue false and
25
misleading financial statements during the Class Period;
26
• whether Defendants acted knowingly or recklessly in issuing false and misleading
27 financial statements;
28
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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 13 of 19
1 • whether the prices of Wells Fargo securities during the Class Period were
artificially inflated because of the Defendants’ conduct complained of herein; and
2
3 • whether the members of the Class have sustained damages and, if so, what is the
proper measure of damages.
4
45. A class action is superior to all other available methods for the fair and efficient
5
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the
6
7 damages suffered by individual Class members may be relatively small, the expense and burden
8 of individual litigation make it impossible for members of the Class to individually redress the
9 wrongs done to them. There will be no difficulty in the management of this action as a class action.
10
46. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-
11
on-the-market doctrine in that:
12
• Defendants made public misrepresentations or failed to disclose material facts
13 during the Class Period;
14
• the omissions and misrepresentations were material;
15
• Wells Fargo securities are traded in an efficient market;
16
• the Company’s shares were liquid and traded with moderate to heavy volume
17
during the Class Period;
18
• the Company traded on the NYSE and was covered by multiple analysts;
19
• the misrepresentations and omissions alleged would tend to induce a reasonable
20
investor to misjudge the value of the Company’s securities; and
21
• Plaintiff and members of the Class purchased, acquired and/or sold Wells Fargo
22 securities between the time the Defendants failed to disclose or misrepresented
material facts and the time the true facts were disclosed, without knowledge of
23 the omitted or misrepresented facts.
24
47. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a
25
presumption of reliance upon the integrity of the market.
26
48. Alternatively, Plaintiff and the members of the Class are entitled to the presumption
27
28 of reliance established by the Supreme Court in Affiliated Ute Citizens of the State of Utah v.
12
CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 14 of 19
1 United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), as Defendants omitted material information in
2 their Class Period statements in violation of a duty to disclose such information, as detailed above.
3
COUNT I
4
(Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Promulgated Thereunder
5 Against All Defendants)
6 49. Plaintiff repeats and re-alleges each and every allegation contained above as if fully
7
set forth herein.
8
50. This Count is asserted against Defendants and is based upon Section 10(b) of the
9
Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the SEC.
10
11 51. During the Class Period, Defendants engaged in a plan, scheme, conspiracy and
12 course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions,
13 practices and courses of business which operated as a fraud and deceit upon Plaintiff and the other
14 members of the Class; made various untrue statements of material facts and omitted to state
15
material facts necessary in order to make the statements made, in light of the circumstances under
16
which they were made, not misleading; and employed devices, schemes and artifices to defraud in
17
connection with the purchase and sale of securities. Such scheme was intended to, and, throughout
18
19 the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members,
20 as alleged herein; (ii) artificially inflate and maintain the market price of Wells Fargo securities;
21 and (iii) cause Plaintiff and other members of the Class to purchase or otherwise acquire Wells
22
Fargo securities and options at artificially inflated prices. In furtherance of this unlawful scheme,
23
plan and course of conduct, Defendants, and each of them, took the actions set forth herein.
24
52. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the
25
Defendants participated directly or indirectly in the preparation and/or issuance of the quarterly
26
27 and annual reports, SEC filings, press releases and other statements and documents described
28 above, including statements made to securities analysts and the media that were designed to
13
CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 15 of 19
1 influence the market for Wells Fargo securities. Such reports, filings, releases and statements were
2 materially false and misleading in that they failed to disclose material adverse information and
3
misrepresented the truth about Wells Fargo’s finances and business prospects.
4
53. By virtue of their positions at Wells Fargo, Defendants had actual knowledge of
5
the materially false and misleading statements and material omissions alleged herein and intended
6
thereby to deceive Plaintiff and the other members of the Class, or, in the alternative, Defendants
7
8 acted with reckless disregard for the truth in that they failed or refused to ascertain and disclose
9 such facts as would reveal the materially false and misleading nature of the statements made,
10 although such facts were readily available to Defendants. Said acts and omissions of Defendants
11
were committed willfully or with reckless disregard for the truth. In addition, each Defendant
12
knew or recklessly disregarded that material facts were being misrepresented or omitted as
13
described above.
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15 54. Information showing that Defendants acted knowingly or with reckless disregard
16 for the truth is peculiarly within Defendants’ knowledge and control. As the senior managers
17 and/or directors of Wells Fargo, the Individual Defendants had knowledge of the details of Wells
18 Fargo’s internal affairs.
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55. The Individual Defendants are liable both directly and indirectly for the wrongs
20
complained of herein. Because of their positions of control and authority, the Individual
21
Defendants were able to and did, directly or indirectly, control the content of the statements of
22
23 Wells Fargo. As officers and/or directors of a publicly-held company, the Individual Defendants
24 had a duty to disseminate timely, accurate, and truthful information with respect to Wells Fargo’s
25 businesses, operations, future financial condition and future prospects. As a result of the
26
dissemination of the aforementioned false and misleading reports, releases and public statements,
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the market price of Wells Fargo securities was artificially inflated throughout the Class Period. In
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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 16 of 19
1 ignorance of the adverse facts concerning Wells Fargo’s business and financial condition which
2 were concealed by Defendants, Plaintiff and the other members of the Class purchased or
3
otherwise acquired Wells Fargo securities at artificially inflated prices and relied upon the price of
4
the securities, the integrity of the market for the securities and/or upon statements disseminated by
5
Defendants, and were damaged thereby.
6
56. During the Class Period, Wells Fargo securities were traded on an active and
7
8 efficient market. Plaintiff and the other members of the Class, relying on the materially false and
9 misleading statements described herein, which the Defendants made, issued or caused to be
10 disseminated, or relying upon the integrity of the market, purchased or otherwise acquired shares
11
of Wells Fargo securities at prices artificially inflated by Defendants’ wrongful conduct. Had
12
Plaintiff and the other members of the Class known the truth, they would not have purchased or
13
otherwise acquired said securities, or would not have purchased or otherwise acquired them at the
14
15 inflated prices that were paid. At the time of the purchases and/or acquisitions by Plaintiff and the
16 Class, the true value of Wells Fargo securities was substantially lower than the prices paid by
17 Plaintiff and the other members of the Class. The market price of Wells Fargo securities declined
18 sharply upon public disclosure of the facts alleged herein to the injury of Plaintiff and Class
19
members.
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57. By reason of the conduct alleged herein, Defendants knowingly or recklessly,
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directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule 10b-5
22
23 promulgated thereunder.
24 58. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and the
25 other members of the Class suffered damages in connection with their respective purchases,
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acquisitions and sales of the Company’s securities during the Class Period, upon the disclosure
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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 17 of 19
1 that the Company had been disseminating misrepresented financial statements to the investing
2 public.
3
COUNT II
4
(Violations of Section 20(a) of the Exchange Act Against The Individual Defendants)
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59. Plaintiff repeats and re-alleges each and every allegation contained in the foregoing
6
paragraphs as if fully set forth herein.
7
8 60. During the Class Period, the Individual Defendants participated in the operation
9 and management of Wells Fargo, and conducted and participated, directly and indirectly, in the
10 conduct of Wells Fargo’s business affairs. Because of their senior positions, they knew the adverse
11
non-public information about Wells Fargo’s misstatement of income and expenses and false
12
financial statements.
13
61. As officers and/or directors of a publicly owned company, the Individual
14
15 Defendants had a duty to disseminate accurate and truthful information with respect to Wells
16 Fargo’s financial condition and results of operations, and to correct promptly any public statements
17 issued by Wells Fargo which had become materially false or misleading.
18 62. Because of their positions of control and authority as senior officers, the Individual
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Defendants were able to, and did, control the contents of the various reports, press releases and
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public filings which Wells Fargo disseminated in the marketplace during the Class Period
21
concerning Wells Fargo’s results of operations. Throughout the Class Period, the Individual
22
23 Defendants exercised their power and authority to cause Wells Fargo to engage in the wrongful
24 acts complained of herein. The Individual Defendants therefore, were “controlling persons” of
25 Wells Fargo within the meaning of Section 20(a) of the Exchange Act. In this capacity, they
26
participated in the unlawful conduct alleged which artificially inflated the market price of Wells
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Fargo securities.
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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 18 of 19
1 63. Each of the Individual Defendants, therefore, acted as a controlling person of Wells
2 Fargo. By reason of their senior management positions and/or being directors of Wells Fargo,
3
each of the Individual Defendants had the power to direct the actions of, and exercised the same
4
to cause, Wells Fargo to engage in the unlawful acts and conduct complained of herein. Each of
5
the Individual Defendants exercised control over the general operations of Wells Fargo and
6
possessed the power to control the specific activities which comprise the primary violations about
7
8 which Plaintiff and the other members of the Class complain.
9 64. By reason of the above conduct, the Individual Defendants are liable pursuant to
10 Section 20(a) of the Exchange Act for the violations committed by Wells Fargo.
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PRAYER FOR RELIEF
12
WHEREFORE, Plaintiff demands judgment against Defendants as follows:
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A. Determining that the instant action may be maintained as a class action under Rule
14
15 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class representative;
16 B. Requiring Defendants to pay damages sustained by Plaintiff and the Class by reason
17 of the acts and transactions alleged herein;
18 C. Awarding Plaintiff and the other members of the Class prejudgment and post-
19
judgment interest, as well as their reasonable attorneys’ fees, expert fees and other costs; and
20
D. Awarding such other and further relief as this Court may deem just and proper.
21
DEMAND FOR TRIAL BY JURY
22
23 Plaintiff hereby demands a trial by jury.
24 Dated: June 4, 2020
25 Respectfully submitted,
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POMERANTZ LLP
27
/s/ Jennifer Pafiti
28
Jennifer Pafiti (SBN 282790)
17
CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Case 3:20-cv-03697-RS Document 1 Filed 06/04/20 Page 19 of 19
1 1100 Glendon Avenue, 15th Floor
Los Angeles, California 90024
2 Telephone: (310) 405-7190
jpafiti@pomlaw.com
3
4 POMERANTZ LLP
Jeremy A. Lieberman
5 (pro hac vice application forthcoming)
J. Alexander Hood II
6 (pro hac vice application forthcoming)
7 600 Third Avenue, 20th Floor
New York, New York 10016
8 Telephone: (212) 661-1100
Facsimile: (212) 661-8665
9 jalieberman@pomlaw.com
ahood@pomlaw.com
10
11 POMERANTZ LLP
Patrick V. Dahlstrom
12 (pro hac vice application forthcoming)
10 South La Salle Street, Suite 3505
13 Chicago, Illinois 60603
Telephone: (312) 377-1181
14
Facsimile: (312) 377-1184
15 pdahlstrom@pomlaw.com
16 BRONSTEIN, GEWIRTZ & GROSSMAN,
LLC
17 Peretz Bronstein
(pro hac vice application forthcoming)
18
60 East 42nd Street, Suite 4600
19 New York, NY 10165
Telephone: (212) 697-6484
20 Facsimile: (212) 697-7296
peretz@bgandg.com
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Attorneys for Plaintiff
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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
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