Federal Judge Rules on Mutual Fund Kickback Allegations Against Wells Fargo, H.D. Vest and Others; Plaintiffs Must Add Additional Investors By November 17, 2006
PR Newswire US2006-10-26
SAN FRANCISCO, Oct. 26 /PRNewswire/ -- A federal judge yesterday allowed a class action lawsuit against Wells Fargo & Co. (WFC) and some of its subsidiaries to proceed, but dismissed portions of the case and ordered other investors to come forward by November 17.
The lawsuit, filed by mutual fund investors in 2005, seeks to recover millions of dollars in alleged secret kickbacks earned by brokers at Wells Fargo and a subsidiary, H.D. Vest Investment Services.
The suit claims that Wells Fargo and H.D. Vest brokers pushed clients into pre-selected mutual funds in exchange for secret payments.
As summed up by the Court in its October 24th Order: "investors thought they were dealing with unbiased broker-dealers when in fact they were not."
The list of mutual funds includes Wells Fargo name-brand funds and funds from Dreyfus, Fidelity, Franklin Tem-pleton, Hartford, MFS, Oppenheimer, Putnam, and others.
Federal Judge William H. Alsup ruled that the plaintiff had asserted two forms of illegal conduct: "(1) he received biased advice from broker-dealers when he thought he was getting impartial recommendations, and (2) the fund assets were dissipated by paying excessive fees to the investment advisers and distributors."
In 2005, the National Association of Securities Dealers fined Wells Fargo $6.99 million for mutual fund kickbacks.
Judge Alsup also dismissed certain claims unless new investors come forward. The judge ruled that the current plaintiff could not pursue claims against H.D. Vest, a Wells subsidiary, or against other Wells funds he did not own.
Judge Alsup gave Plaintiff's counsel until November 17 to come forward with other investors who wish to pursue claims against H.D. Vest and other Wells Fargo funds. All such persons should contact the firm of Gutride Safier LLP at http://www.gutridesafier.com/ as soon as possible.
In the past two years, the Securities and Exchange Commission has issued fines for similar kickback arrangements against at least five mutual fund companies. Lawsuits against others have led to settlements recovering more than $200 million for investors.
Trial against Wells Fargo has been set for November 2007 in San Francisco federal court.