Wells Fargo Reaches $79 Million Deferred Comp Settlement with Brokers
Wells Fargo Advisors has agreed to pay $78.95 million to resolve a class-action lawsuit from former brokers alleging that it illegally withheld deferred compensation when they left to join other firms.
The potential costs, risks and delay of continued litigation justify the adequacy of the settlement, lawyers wrote in a court-filed memo supporting the settlement.
“I felt like Wells did a bunch of people wrong by taking their deferred compensation,” said Robert F. Berry, the named plaintiff in the lawsuit that was filed three years ago.
Berry, who was “permitted to resign” from Wells’ semi-independent Profit Formula channel six years ago after working at the firm and predecessor First Union Capital Markets for almost 20 years, alleged that Wells withheld $200,000 in his deferred compensation plan. He asserted violation of The Employee Retirement Income Security Act of 1974, and “conversion” of money owed him, among other charges.
“Despite plaintiff’s confidence in his case, he faced significant hurdles in proving his claims,” Berry’s lawyers wrote in a memorandum supporting the settlement.
Wells had argued that forfeiture of the deferred bonuses was legal because the brokers involved were among a “select group of management or highly compensated employees” covered by “top hat” retirement plans exempt from certain ERISA provisions.
“While Wells Fargo has consistently denied the allegations in this class-action lawsuit involving former financial advisors, we also believe that resolving this matter is in the best interest of the company,” Wells spokeswoman Shea Leordeanu said in a statement.
The settlement does not require Wells to change its forfeiture requirements for top-hat plans, she said.
At issue were bonuses vesting over five-to-seven years for hitting sales and length-of-service goals, according to the complaint.
Berry has been affiliated with LPL Financial as an independent broker in Lexington, South Carolina, since leaving Wells in February 2014. A 35-year veteran who began his career with Dean Witter and Prudential Securities before joining First Union in 1994, he was fired by Wells after his branch manager “discovered several binders of customer information” in the trunk of his car, according to his BrokerCheck report.
Berry is litigating in state court a wrongful termination and defamation claim against Wells, arguing that its allegations on regulatory forms of taking customer records was a subterfuge.
“They put that in there to try to keep me from picking up clients and to hurt my U4,” he said.
The class-action lawsuit was brought by lawyers at Izard, Kindall & Raabe in West Hartford, Conn., Motley Rice in Mount Pleasant, S.C. and Ajamie LLP in Houston, Tex. The plaintiffs’ firms are entitled to 30% of the award, or $23.7 million, according to court papers.
The proposed settlement was reported earlier by “Law 360.”