Bloomberg‘s Matt Levine is always thought provoking. Earlier this week, he wrote about 2022 accusations against Wells Fargo that they conducted “fake job interviews for fake diversity purposes.” Following his common theme of “everything is securities fraud,” he analyzes language in Wells Fargo’s 2021 10-K stating that diversity was “in Wells Fargo’s own words, ‘critical to our company’s long-term growth and success.’”
Ultimately, his point is this:
“Wells Fargo was also telling shareholders, right there in its 10-K, that it was ‘dedicated to recruitment and career development practices that support our employees and promote diversity in our workforce,’ and that it had ‘a commitment to increase diverse representation in leadership roles.’ If that wasn’t true, then it was lying to the shareholders. It was lying to shareholders to induce them to buy stock. It was committing securities fraud.”
Just his opinion, of course. Turning to potential damages for which shareholders could sue, Levine points to share price the day before and after the NYT article broke on the fake interviews:
“The stock closed at $42.11 on May 18, the day before the Times report came out, and hit $45.47 on June 7… The shareholders can easily quantify their damages, or at least, they can easily argue for some quantity of damages. That quantity is large: If the fake interviews took $2 off the stock price, then they cost shareholders $7.6 billion. So they can sue for $7.6 billion.”
He backtracks on that somewhat in a footnote, clarifying that it aint’ quite that simple:
“I am exaggerating: They need to argue over the relevant time period and try to isolate the impact of the misstatements from general market and sector moves. You need some expert testimony from an economist, and there will be arguments about how much of an effect this all had. But it’s *relatively* doable.”
In the next blog, I’ll discuss why this should concern anyone involved in drafting climate disclosure language for 10-Ks even though SEC’s climate rule is stayed.
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