Internal communications by executives play a big role in a St. Paul trial over disputed investment strategy.
David Phelps, Minneapolis Star-Tribune
An e-mail sent by a Wells Fargo & Co. executive in early 2008 offered this warning to colleagues: “Everything we say will be used against us.”
That e-mail now is among the mound of internal bank documents, including handwritten meeting notes, introduced by attorneys for four nonprofits who are suing Wells Fargo over its securities-lending investment program.
Halfway through a projected six-week trial in St. Paul, the question is whether such evidence can convince a jury to award the nonprofits $407 million in damages.
Wells Fargo will present its defense in the coming weeks, but offered some insight last week when its lawyers noted that the plaintiffs are not unsophisticated investors. The nonprofits employ outside financial advisers and are governed by boards that include directors with backgrounds in banking and finance, the bank’s lawyers contend.
Bank executives have been confronted at the trial with e-mails and e-mail chains about the Wells Fargo securities lending program, which ran into trouble when the credit markets soured in 2007. The e-mails suggest that executives fretted over responding to the credit crisis and debated what to tell clients.
“I think it is a bad idea to answer these questions right now,” one executive in the securities lending department said in an e-mail about client inquiries as the market tanked. The same e-mail contained the warning that executives’ statements will be used against them.
Several months later, the same executive said in another e-mail about continuing client inquiries, “We never admit to ‘having problems.’”
The e-mails were introduced by Mike Ciresi, lead attorney for three charities and an insurance fund, as he cross-examined bank executives, including retired chairman Richard Kovacevich and current chairman John Stumpf. Other e-mails and meeting notes reveal worries about the management of the program and whether the bank or investors should bear the losses.
