Wells Fargo Complaint - The D&O Diary

Case 3:20-cv-03697 Document 1 Filed 06/04/20 Page 1 of 19

1 POMERANTZ LLP

Jennifer Pafiti (SBN 282790) 2 1100 Glendon Avenue, 15th Floor

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Los Angeles, California 90024 Telephone: (310) 405-7190

4 jpafiti@

5 Attorney for Plaintiff

6 [Additional Counsel on Signature Page] 7

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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GUOFENG MA, Individually and On Behalf of All Others Similarly Situated,

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Plaintiff,

13 v.

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15 WELLS FARGO & COMPANY, CHARLES W. SCHARF, and JOHN R.

16 SHREWSBERRY,

Case No.

CLASS ACTION

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

DEMAND FOR JURY TRIAL

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Defendants.

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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

Case 3:20-cv-03697 Document 1 Filed 06/04/20 Page 2 of 19

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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 6 by and through Plaintiff's attorneys, which included, among other things, a review of the 7 Defendants' public documents, conference calls and announcements made by Defendants, United

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.

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NATURE OF THE ACTION

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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

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2. Wells Fargo is a diversified financial services company that provides banking,

23 investment, mortgage, and consumer and commercial finance products and services to individuals,

24 businesses, and institutions in the U.S. and internationally.

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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 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.

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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 6 Company had opened millions of accounts in customers' names without their permission, a change

7 which would allow Wells Fargo to make additional small business loans as part of the PPP.

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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 14 statements regarding the Company's business, operational and compliance policies. Specifically,

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

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7. On April 19, 2020, after at least one lawsuit was filed against the Company, reports

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

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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

Case 3:20-cv-03697 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 6 days to close at $26.84 per share on April 21, 2020.

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9. Finally, on May 5, 2020, Wells Fargo filed a quarterly report on Form 10-Q with

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."

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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.

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11. As a result of Defendants' wrongful acts and omissions, and the precipitous decline

15 in the market value of the Company's securities, Plaintiff and other Class members have suffered

16 significant losses and damages.

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JURISDICTION AND VENUE

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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

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13. This Court has jurisdiction over the subject matter of this action pursuant to 28

23 U.S.C. ? 1331 and Section 27 of the Exchange Act.

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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. 28

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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

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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.

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PARTIES

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16. Plaintiff, as set forth in the attached Certification, acquired Wells Fargo securities

8 at artificially inflated prices during the Class Period and was damaged upon the revelation of the

9 alleged corrective disclosures.

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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 14 "WFC."

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18. Defendant Charles W. Scharf ("Scharf") has served as Wells Fargo's Chief

16 Executive Officer at all relevant times.

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19. Defendant John R. Shrewsberry ("Shrewsberry") has served as Wells Fargo's Chief

18 Financial Officer at all relevant times.

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20. Defendants Scharf and Shrewsberry are sometimes referred to herein as the

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"Individual Defendants." 21

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21. The Individual Defendants possessed the power and authority to control the

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

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CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

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