Wells Fargo (WFC) has agreed to pay up to $2.5 million in attorneys' fees to settle two lawsuits that stem from its purchase of Wachovia in 2008.
The nation's fourth-biggest bank by assets said in a filing with the Securities and Exchange Commission on Friday that its board would improve some of its governing practices as part of the proposed pact, which would resolve claims by shareholders that Wachovia bought Golden West Financial in 2006 without reviewing the mortgage lender's portfolio sufficiently.
The proposed settlement, which is expected to be reviewed on March 5 by U.S. District Judge Yvonne Gonzalez Rogers in Oakland, Calif., would not involve any payments by former directors or officers of Wachovia or Golden West to Wells Fargo or the shareholders who filed the suit.
The lawsuits, which were filed separately in 2010 and 2012 by Wells Fargo shareholders who previously owned stock in Wachovia, arise from Wells Fargo's purchase of Wachovia for roughly $15.1 billion in stock.
The suits allege that Wachovia's board acquired Golden West "without considering the nature and abysmally poor quality of much of Golden West's loan portfolio, particularly mortgage loans which originated through its 'Pick-A-Payment' promotional activities" that Wachovia later adopted, according to the complaints.
According to the shareholders, Wachovia was forced to set aside billions of dollars to cover losses on loans by itself and Golden West. The suits also charge Wells Fargo with failing to pursue legal claims against Wachovia's board.
As part of the settlement, Wells Fargo has agreed that the risk committee of its board will hire an independent consultant to advise the committee on risk-related concerns that affect Wells Fargo and the nation's other big banks for at least three years. Wells Fargo's board also has promised to abide by a policy that governs its supervision of acquisitions that was developed by the parties to the litigation.
A Wells Fargo spokesman declined to comment on the settlement, which was first reported by Reuters.