California residents may have read reports about widespread misconduct and unethical sales practices at Wells Fargo & Company. Investigators discovered that low-level sales employees opened millions of accounts without permission in order to meet performance standards and earn bonuses, and it was subsequently learned that senior executives were likely aware that this was going on. The resulting backlash saw the value of Wells Fargo stock plunge by as much as 15 percent, and the San Francisco-based company is now facing several lawsuits from current and former employees over the effect that this devaluation has had on the value of its retirement plan.
The Employee Retirement Income Security Act requires important financial information to be shared with plan participants, and the lawsuits claim that Wells Fargo executives knew, or should have known, that the company's stock value was inflated and would likely fall. The plaintiffs say that this knowledge should have prompted the defendants to stop contributing to the Wells Fargo Stock Fund.
Determining whether or not distancing the retirement plan from Wells Fargo stock would have contravened insider trading laws could be a crucial factor should these ERISA lawsuits go to trial. The plaintiffs say that these laws would not apply because no transactions would have been completed and no insider benefits received if senior executives had moved away from Wells Fargo stock.
Workers who contribute to company retirement plans expect those administering them to meet their fiduciary obligations. However, the laws dealing with stock trading and employee benefits can sometimes seem contradictory, and the defendants in complex financial cases could claim that abiding by the provisions of one law would result in them breaking others. Attorneys with experience in employee benefits litigation may expect such arguments and prepare for them before initiating lawsuits on behalf of workers who have been denied rights guaranteed by federal law.