Associated Press, Published June 03 2010
St. Paul jury hits Wells Fargo with $30m judgmentST. PAUL — A jury was meeting to determine punitive damages against Wells Fargo on Thursday, a day after those jurors awarded $29.9 million to four nonprofits after finding the bank had breached its fiduciary duty and engaged in fraud.
Those nonprofits lost money in what the bank pitched as a safe investment program. The Star Tribune reports the 10-member jury took a day to reach its unanimous verdict on Wednesday after a six-week trial in Ramsey County District Court.
Plaintiffs attorney, Mike Ciresi, had argued Tuesday for more than $400 million in damages for several alleged wrongs, including intentional fraud, breach of contract and negligent misrepresentation. The jury found none of them.
But the jury did find that Wells Fargo breached its fiduciary duty to its clients. During jury instructions, Judge M. Michael Monahan told the jurors that fiduciary duty meant the bank must operate in the best interests of its clients and with full disclosure.
Of the damages, $16 million was awarded for violation of the Minnesota Consumer Fraud Act. The jury was asked, "Did Defendant Wells Fargo provide false information or use a deceptive practice in the course of selling the securities lending services?" Jurors answered yes on the verdict form.
Wells Fargo claimed partial victory in statement. "We are pleased that the jury denied the plaintiffs the amount of damages they were seeking," the bank said. It said the verdict "validated" its position that there was no breach of contract.
The plaintiffs had sought more than $400 million in damages. Attorneys around the country have watched the case because similar disputes were settled out of court. This was the first such case to go to trial.
The plaintiffs are the Minneapolis Foundation, the Minnesota Medical Foundation, the Robins Kaplan Miller & Ciresi Foundation for Children and the Minnesota Workers' Compensation Reinsurance Association.
Wells Fargo's attorney, Robert Weinstine, said in closing arguments the bank shouldn't pay any damages, even though the nonprofits were down $14.1 million. He said the loss was a consequence of the recession and credit crisis that hit three years ago.
At the core of the trial was a low-profile investment technique called securities lending. While these investments usually are conservative and safe, the nonprofits claimed that Wells Fargo adopted a risky strategy that proved vulnerable during the credit crisis.
Copyright 2010 The Associated Press.