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In a dramatic close to a long-running employee benefits dispute, Wells Fargo & Co. has agreed to pay $84 million to settle a proposed class action lawsuit accusing the banking giant of misusing dividends from its employee stock ownership plan (ESOP) to meet its 401(k) matching contributions. The proposed settlement, filed Wednesday in Minnesota federal court, marks a major resolution in a case that has shadowed the bank since 2022.

The class of current and former Wells Fargo 401(k) participants filed a motion seeking preliminary approval of the deal in the Employee Retirement Income Security Act (ERISA) suit. If approved, the settlement will be distributed among more than 425,000 eligible participants on a pro rata basis — a result the plaintiffs hailed as “an excellent outcome for the class.”

Former Employees Claimed Misuse of Dividend Income

The controversy traces back to a September 2022 lawsuit brought by former Wells Fargo workers who alleged that the bank diverted ESOP dividend income — funds meant to benefit employee shareholders — to cover its own 401(k) matching obligations.

The plaintiffs contended this maneuver cheated plan participants out of millions in benefits, violating the fiduciary duty Wells Fargo owed under federal law. They also accused GreatBanc Trust Co., the ESOP’s fiduciary, of intentionally overvaluing preferred stock purchased for the fund, ensuring inflated dividends that allegedly funneled excess income back to the bank.

Adding to the mix, former Wells Fargo CEO Timothy Sloan was named as a defendant, accused of allowing or endorsing the scheme in breach of ERISA’s fiduciary standards.

Settlement Resolves All Allegations, Including Against GreatBanc and Sloan

According to the class’s memorandum, the $84 million fund will fully resolve claims against Wells Fargo, GreatBanc Trust Co., and Timothy Sloan, without any party admitting wrongdoing. The agreement explicitly states that neither GreatBanc nor Sloan will be responsible for funding any portion of the settlement, ensuring Wells Fargo alone shoulders the financial cost.

The deal follows months of complex negotiations. After parties reported a tentative agreement in August, the court granted extensions for both sides to finalize settlement terms. The breakthrough came soon after U.S. District Judge Laura M. Provinzino certified a class in January, clearing the way for collective relief for former employees who had enrolled their 401(k) accounts in the bank’s ESOP.

$84 Million Payout Seen as Major Win for Class Members

Class counsel described the resolution as “an excellent result,” highlighting the scale of compensation and the number of employees affected. The fund will be distributed based on each participant’s vested shares of company stock, with all administrative and legal costs deducted prior to allocation.

Neither Wells Fargo nor representatives for the plaintiffs offered comments following the filing, and GreatBanc Trust did not immediately respond to requests for a statement.

Legal Teams Behind the Case

The workers are represented by:

• Elizabeth M. Binczik, Steven Andrew Smith, and Brock J. Specht of Nichols Kaster PLLP

• Gregory Y. Porter, Mark G. Boyko, and Laura Babiak of Bailey & Glasser LLP

• Nina Wasow, Daniel Feinberg, Todd Jackson, and Mary Bortscheller of Feinberg Jackson Worthman & Wasow LLP

Wells Fargo’s defense is led by Deputy General Counsel and EVP Craig Baldauf, with Russell L. Hirschhorn and Sydney L. Juliano of Proskauer Rose LLP, and Jeffrey Justman of Faegre Drinker Biddle & Reath LLP.

GreatBanc Trust Co. is represented by Roger Stetson of Barack Ferrazzano Kirschbaum & Nagelberg LLP.

A Step Toward Closure for Wells Fargo

The Wells Fargo $84M settlement marks yet another chapter in the bank’s history of high-profile legal battles over employee benefit and financial practices. While the settlement stops short of an admission of wrongdoing, it effectively closes the curtain on a case that questioned how one of America’s largest banks manages its own workers’ retirement funds — a reminder that even corporate giants are not immune from scrutiny when it comes to their fiduciary duties.