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Chattanooga Pension Accuses Wells Fargo of 'Potential Fraud' in Fee Dispute
The Chattanooga Fire and Police Pension Fund has filed a whistleblower complaint with the Securities and Exchange Commission after its trustee Wells Fargo improperly kept fee rebates from fund managers.
Wells Fargo has found itself in hot water once again, this time over its retirement group’s handling of fee rebates owed to a Chattanooga pension fund.
While acting as a trustee of the Chattanooga Fire and Police Pension Fund, Wells Fargo erroneously kept fee rebates from mutual fund managers employed by the retirement system, according to a statement from a spokesperson for the San Francisco-based financial services company.
“We acknowledge that because there was a change directed by the client in 2017, we made an error in setting up the revenue sharing associated with that change appropriately and the revenue share rebates did not occur as intended,” she said. “We are sorry this error occurred.”
The share of rebates improperly held back from the Chattanooga pension amounted to about $15,000. In the statement, Wells Fargo said the full amount has since been returned to the retirement plan.
Katrina Abbott, a fund administrator at the Fire and Police Pension Fund, said the fund is currently investigating the withheld rebates, and has filed a whistleblower complaint with the Securities and Exchange Commission.
Additionally, she said the fund was in the process of switching from a board of directors to a board of trustees, at which point Wells Fargo will no longer serve as trustee.
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The Wells Fargo spokesperson said the company has been in “active dialogue” with the Fire and Police Pension Fund as part of its commitment to resolving the situation is “disappointed they felt the need to file a complaint requesting information we have provided and are very willing to provide.”
According to a statement made Wednesday on the Chattanooga pension’s Facebook page, the fund’s board of directors has been investigating “potential fraud and overcharging” by Wells Fargo for the last several months.
“Wells Fargo’s answers have changed over time revealing ever-greater amounts of undisclosed revenue sharing, systemic errors, and incomplete records,” according to the statement. “The board has lost confidence that the answers provided by Wells to date are complete.”
The pension’s formal complaint against Wells Fargo is the latest in a series of blows against the bank. Earlier this year, Wells Fargo was sanctioned by the U.S. Federal Reserve Board for what the regulator described as “widespread consumer abuses and compliance breakdowns.”
As part of the sanctions, Wells Fargo is barred from growing any larger, and must keep its total asset size at or beneath its level at the end of 2017. The firm was also ordered to replace four of its board members.