$62.5M addresses those who lost money in securities lending.
Final approval was given Monday to a $62.5 million settlement between Wells Fargo and large institutional clients who lost money in a complicated investment program known as securities lending.
As part of the settlement, U.S. District Judge Donovan Frank awarded attorneys representing those clients nearly $23 million in fees and expenses.
Approval of the settlement was expected since preliminary approval of the deal was granted in June.
The agreement is the third of five lawsuits to be resolved involving Wells Fargo and its investment program. In 2012, a jury in Ramsey County awarded $57 million to several charitable organizations. Last year, San Francisco-based Wells Fargo & Co. prevailed in a jury trial in federal court.
Plaintiffs in the cases, including the one that settled Monday, claimed that Wells Fargo lost money for its clients by allegedly investing in complicated and risky ventures with collateral from securities owned by the clients that were loaned to brokers. The small commission the bank received for lending the securities was then invested, with profits to be split with the client.
Wells Fargo said in a statement that its clients suffered “minimal losses of 5 percent or less” during a time of great market turmoil.
“Wells Fargo was focused at all times on serving our clients’ interests,” the bank’s statement said. The largely defunct securities lending program was run out of Minneapolis.
The settlement approved Monday was a class-action lawsuit involving 92 members. The lead clients were a public employee pension fund for the city of Farmington Hills, Mich., and the pension fund for a carpenters’ union in Arizona.
The award for attorneys’ fees will be split among four law firms, including the Zimmerman Reed law firm of Minneapolis.
Frank’s order leaves it up to the two lead law firms in the case, Glancy Binkow & Goldberg in Los Angeles and the Miller Law Firm in Rochester, Mich., to handle distribution of the funds.
“We’re very happy to get a significant recovery especially in light of the last Wells Fargo case,” said Peter Binkow, with the Glancy Binkow firm.
Binkow declined to say how fees would be distributed among the four firms.
The $20.8 million in fees represents one-third of the settlement amount, as was requested by the lawyers who took the case on a contingency basis. Frank also approved $2 million in expenses related to the case.
“One-third is pretty standard for a contingency case, although I’ve seen it as high as 40 percent,” said Roy S. Ginsburg, a Minneapolis attorney who advises lawyers but was not involved in the case.
In his order, Frank said the award for attorneys’ fees was “fair and reasonable” for litigation that lasted three years and involved more than 7 million pages of documents, 90 depositions and 2,399 exhibits.
“Class counsel has conducted the litigation and achieved the settlement in good faith and with skill, perseverance and diligent advocacy,” Frank wrote, noting there was “a significant risk” that the plaintiffs would receive nothing.
David Phelps • 612-673-7269