Wells Fargo shareholder sues over reports of sham 'diversity' policy

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Customers approach the Wells Fargo & Co. bank in downtown Denver. REUTERS/Rick Wilking

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  • Wells Fargo allegedly held fake interviews to comply with its own diversity policy
  • Lawsuit says bank's stock dropped 8% as a result

(Reuters) - A Wells Fargo & Co shareholder has filed a proposed class action accusing the bank of harming its reputation and stock value by allegedly holding sham job interviews so it would appear to comply with an internal policy mandating diverse pools of candidates.

The lawsuit filed in San Francisco federal court on Tuesday says Wells Fargo stock dropped by more than 8% earlier this month in the wake of a New York Times article that said federal prosecutors were opening a criminal inquiry into the bank's hiring practices.

The newspaper had reported in May that Wells Fargo conducted interviews for jobs that had already been promised to others to create the appearance that it was considering more diverse slates of applicants. Reuters has not substantiated the Times reports.

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A Wells Fargo spokesperson said the claims were without merit and that its diversity guidelines have led to "meaningful, positive results." The bank said 42% of individuals who were hired in 2021 and earn $100,000 or more identified as racially or ethnically diverse, a 5% increase from 2019.

In a press release responding to the article about the federal investigation, Wells Fargo said it had temporarily paused its diversity policies to ensure that senior leaders are properly implementing them.

In Tuesday's lawsuit, plaintiff Khosrow Ardalan accused Wells Fargo of making false and misleading statements about its commitment to diversity and its compliance with a 2020 policy requiring that at least half of interview candidates must represent "a historically underrepresented group."

Ardalan says those statements artificially inflated the value of Wells Fargo stock.

The lawsuit seeks class action status for Wells Fargo shareholders and to force the bank to cover their losses stemming from the reports about its hiring practices.

The case is Ardalan v. Wells Fargo & Co, U.S. District Court for the Northern District of California, No. 3:22-cv-03811.

For Ardalan: Jennifer Pafiti of Pomerantz

For Wells Fargo: Not available

(NOTE: This article has been updated to include a statement from Wells Fargo.)

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Wells Fargo pauses diverse slate hiring policy after reports of fake job interviews

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Dan Wiessner (@danwiessner) reports on labor and employment and immigration law, including litigation and policy making. He can be reached at daniel.wiessner@thomsonreuters.com.