Wells Fargo faces a proposed class action lawsuit over stock-price drops an investor argues were linked to reports that the company conducted fake job interviews to satisfy internal diversity requirements.
According to the 26-page complaint, Wells Fargo in 2020 expanded its “Diverse Search Requirement” to mandate that for most posted roles in the U.S. with total direct compensation of more than $100,000 per year, at least half of the interview candidates must represent a historically underrepresented group with respect to at least one diversity dimension. Moreover, the company began to require that at least one interviewer on the hiring panel represent a historically underrepresented group with respect to at least one diversity dimension, the lawsuit says.
On May 19, 2022, the case relays, the New York Times published a report titled “At Wells Fargo, a Quest to Increase Diversity Leads to Fake Job Interviews,” wherein seven current and former employees claimed that for many open positions, Wells Fargo would interview a so-called “diverse” candidate for a position that had already been promised to someone else.
Upon this news, the lawsuit says, Wells Fargo’s common stock price dropped $0.44 per share, or more than one percent, by May 20.
On June 6, Reuters published an article titled “Wells Fargo pauses diverse slate hiring policy after reports of fake job interviews,” with the piece relaying that the bank intended to conduct a review of its “diverse slate guidelines” in light of the New York Times report, the complaint says. Three days later, the New York Times reported that federal prosecutors had opened a criminal inquiry into Wells Fargo’s hiring practices, the suit states.
The June 9 NYT article said that federal prosecutors are investigating whether Wells Fargo violated federal law by conducting fake job interviews to meet its “diverse search” requirement, the case shares. The report also added that since the publication of the May 19 article, “another 10 current and former employees have shared stories about how they were subject to fake interviews, or conducted them, or saw paperwork documenting the practice,” and that “sham interviews” were effectively a regular occurrence at Wells Fargo, the lawsuit relays.
Following these disclosures and a Wells Fargo press release in which it responded to the Times, the company’s common stock price fell again, this time by $3.68 per share, or 8.62 percent, the complaint says.
The lawsuit alleges that Wells Fargo & Company violated federal securities law and harmed investors financially by misrepresenting its commitment to diversity in the workplace and conducting fake job interviews to satisfy internal diversity requirements. Further, the case accuses Wells Fargo of subjecting the company to an increased risk of regulatory and/or governmental scrutiny and enforcement action, including criminal charges.
The suit looks to represent all persons and entities who bought or otherwise acquired Wells Fargo common stock between February 24, 2021 and June 9, 2022.
According to legal publication Law360, Wells Fargo said this week that the proposed class action is “without merit.”
“We look forward to vigorously defending ourselves,” Wells Fargo said. “At Wells Fargo, we are deeply dedicated to diversity, equity and inclusion, and we do not tolerate racial discrimination.”
The case was filed on June 28, 2022, the same day House Financial Services Committee Chairwoman Maxine Waters, D-California, sent a letter to federal regulators urging them to “escalate penalties” against Wells Fargo “in a way that is reflective of its history of repeat offenses.” In response, Wells Fargo, in a statement to Law360, expressed disappointment in Chairwoman Waters’ letter, which the company argued “does nothing but rehash legacy issues that occurred under prior leaders.”
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