Wells Fargo Whistle-Blower Suit Revived by Appeals Court

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By Rob Tricchinelli

A federal appeals court revived a whistle-blower suit against Wells Fargo, in which two lenders later acquired by the bank were accused of making false statements about compliance with banking laws in order to borrow money from the Federal Reserve more cheaply.

The U.S. Court of Appeals for the Second Circuit, which had dismissed the case in May 2016, sent it back to a trial court Sept. 7 after a February order from the U.S. Supreme Court ( United States v. Wells Fargo & Co. , 2017 BL 314563, 2d Cir., No. 15-2449, 9/7/17 ). The high court said the case should be considered in light of a June 2016 decision changing the contours for stating a claim under the False Claims Act.

The conduct alleged by Robert Kraus, who worked for Wachovia Corp., and Paul Bishop of World Savings Bank took place before the financial crisis and is unrelated to the latest series of misconduct uncovered at the beleaguered bank.

“We look forward to stating our legal position with the District Court,” Elise Wilkinson, a Wells Fargo representative, told Bloomberg BNA.

‘Material’ Claims

The intervening decision flagged by the Supreme Court “set out a materiality standard for FCA claims that has not been applied in the present case,” the three-judge panel said in a per curiam opinion. Sitting on the panel were Chief Judge Robert A. Katzmann and Judges Robert D. Sack and Raymond J. Lohier Jr.

The panel instructed the trial court to determine whether the lenders’ "alleged misrepresentations were material.” Kraus and Bishop alleged that Wells Fargo made false certifications using both express statements and implications.

Wells Fargo is represented by Troutman Sanders LLP in New York and Charlotte, N.C., and K&L Gates LLP in Charlotte. Kraus and Bishop are represented by Goldstein & Russell PC in Bethesda, Md., and Berg & Androphy in Houston.

To contact the reporter on this story: Rob Tricchinelli in Washington at rtricchinelli@bna.com

To contact the editor responsible for this story: Seth Stern at sstern@bna.com

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