Wells Fargo Advisors to Pay $35.5 Million to Settle Race Discrimination Suit
Wells Fargo Advisors will pay $35.5 million to settle a putative class-action lawsuit filed three years ago that alleged discrimination against African American financial advisors, according to an agreement filed late last week in a Chicago federal court.
As part of the settlement, the brokerage unit of Wells Fargo Corp. also agreed to so-called programmatic reforms, including changes to recruiting and management training programs and reviews of its remedial efforts that will be effective for at least four years. The tentative settlement, which was filed in the U.S. District Court in the Northern District of Illinois on Friday, affects more than 320 current and former brokers, according to Linda Friedman, a partner at Chicago-based law firm Stowell & Friedman that represented the brokers.
Under terms of the agreement, the lawyers will receive about $8.9 million of the settlement amount plus costs, while the six named plaintiffs will each receive $175,000.
“The money doesn’t undo what’s been done to people over the course of their lives or careers,” said Lance Slaughter, a named plaintiff who has been a Wells broker for 11 years and is based in Washington D.C. “The programmatic relief is a major concern for me. Some of the enhancements can really make a difference for people who are hurting.”
In his claim, which was filed in September 2013 one month after Merrill Lynch agreed to a $160 million settlement of a racial discrimination suit, Slaughter alleged that he and other African American brokers and trainees were denied business opportunities, excluded from high-producing teams because of their race. His case was combined in 2014 with other discrimination complaints against Wells Fargo Advisors’ private client group and its in-bank branch brokerage programs.
Under the proposed settlement, which awaits approval from Judge Harry Leinenweber, any current or former African American broker or trainee employed at Wells Fargo at any time from September 2009 to December 31, 2016, is eligible for an award. Payments will be based on length of service at the Wells broker-dealer and personal experiences regarding account transfers, teaming, managerial support and other factors that will be evaluated by one or more independent “neutral” parties selected by Lynn Cohn, the Special Master appointed by the court.
Wells Fargo Advisors, whose parent company agreed in September to pay $185 million to settle charges of creating false banking and credit card accounts for customers, denied all claims of race discrimination.
“[P]utting this matter behind us is in the best interests of our team members, clients and investors,” spokeswoman Helen Bow said in an e-mailed statement. “Resolving this matter allows Wells Fargo Advisors to continue to focus on providing a diverse and inclusive work environment where all of our team members can thrive through industry leading recruiting, coaching, leadership and business development practices.”
As part of its remediation efforts, Wells agreed to end attempts to require new brokers and trainees to reimburse the company for training costs, a practice challenged in a previous lawsuit against Wells Fargo Advisors.
It also agreed to set up a “resource” focused exclusively on recruiting black advisors and trainees, to review its branch manager assessment program to promote a diverse applicant pool for management positions and to establish a Business Development Fund of up to $500,000 to be used by African American brokers in private client group and bank offices.
Fewer than 1% of the approximately 15,000 brokers who worked at Wells Advisors from late 2009 until this year are African American, according to Friedman.
The $35.5 million tentative settlement exceeds a $32-million agreement Wells negotiated in 2010 to resolve claims from female advisors of sex discrimination.