Labor Department Settles Pension Fund Charges Against Wells Fargo Bank Over Purchase of Company Stock

Archived News Release — Caution: Information may be out of date.

San Francisco, California - The U.S. Department of Labor obtained a consent decree, entered today, requiring Wells Fargo Bank, N.A. to develop stringent procedures for fairly and accurately valuing non-publicly traded company stock purchased by employee stock ownership plans (ESOPs) and certain other plan clients of Wells Fargo. The case was brought to resolve allegations involving the purchase of the stock of Toms Sierra Company, Inc. by its ESOP.

Toms Sierra operates bulk petroleum facilities, service stations, and tire and auto parts stores in Northern California and Nevada. Wells Fargo, as the ESOP trustee, approved the sale of the Toms family’s interests to the ESOP in October 1998. Some 275 participants were covered by the plan at the time.

The department’s settlement is contingent upon settlement of a class action lawsuit. The department’s settlement resolves a lawsuit filed on December 3, 2001, against Wells Fargo Bank and the former owners of Toms Sierra, for allegedly causing the ESOP to lose over $10 million by purchasing shares of company stock from members of the Toms family at well above fair market value. The department’s lawsuit continues against members of the Toms family.

Under the settlement, Wells Fargo will cooperate with the Labor Department in reviewing certain plan clients that hold non-publicly traded shares of the employer’s stock to assure compliance with the Employee Retirement Income Security Act. In a separate settlement of a private class action lawsuit, Wells Fargo agreed to restore $5.35 million in losses to the Toms Sierra ESOP. Sierra Energy, which bought Toms Sierra in 1998, will pay an additional $5 million to the ESOP, and will receive the ESOP's remaining shares of Toms Sierra stock owned by the ESOP upon approval of the class action settlement brought by the plan's court-appointed trustee.

The settlement, entered in federal district court in Sacramento, resulted from an investigation conducted by the San Francisco regional office of the department’s Pension and Welfare Benefits Administration (EBSA).

(Chao v. Wells Fargo Bank, N.A.
Civil Action No. CIV-S-01-2211)

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Archived News Release — Caution: Information may be out of date.