NEW YORK May 29 Wells Fargo & Co has agreed to pay $62.5 million to settle claims from a group of institutional investors that the bank improperly advertised a risky securities lending program as safe.
Approximately 100 investors, led by the City of Farmington Hills Employees Retirement System pension plan, have asked U.S. District Judge Donovan Frank in St. Paul, Minnesota, for preliminary approval of the deal, which would resolve a 2010 class action.
The plaintiffs argued that the bank marketed its lending program as safe but instead invested their funds in risky products such as mortgage-backed securities, causing significant losses.
In settling the case, Wells Fargo continued to deny any wrongdoing, according to court papers.
A lawyer for the plaintiffs did not immediately respond to a request for comment on Thursday.
Wells Fargo also did not immediately respond to requests for comment.
A hearing before Frank is scheduled for June 5.
Last year, a federal jury ruled in Wells Fargo's favor after a trial over similar claims that it misled a separate group of investors about its securities lending program.
Lawyers for the plaintiffs in the current case cited the outcome of that trial as one factor in their decision to settle rather than risk continuing the litigation.
Other lawsuits concerning the lending program remain pending in Minnesota.
The case is The City of Farmington Hills Employees Retirement System et al. v. Wells Fargo Bank, U.S. District Court for the District of Minnesota, No. 10-cv-04372. (Reporting by Joseph Ax; Editing by Jan Paschal)