Shareholders Sue Wells Fargo Executives
The lawsuit was filed in San Francisco Superior Court, two weeks after Wells lost its own court bid against the U.S. Internal Revenue Service to claim $115 million in deductions related to “sale in/lease out,” or SILO, shelters.
Wells has a related lawsuit pending in Minnesota federal court to seek SILO-related tax refunds, the complaint said.
A Wells Fargo spokeswoman declined to comment, saying the San Francisco-based bank had not finished reviewing the latest lawsuit.
According to the lawsuit, Wells managers sought to take advantage of the tax shelters in 2002 despite knowing they were about to be outlawed, and then rejected a chance to settle with the IRS during a 2008 amnesty period.
Wells accumulated $1.6 billion in SILO-related assets even after IRS audits in 2002 and 2003 disallowed $162 million in deductions and fined the bank $8 million, the lawsuit said.
“Even when it was known that Congress and the IRS were challenging these aggressive tax shelters, and then formally disallowed them, Wells Fargo was allowed to continue seeking millions of dollars in tax deduction, at great cost and waste of corporate and judicial assets,” according to the complaint filed by Wells investor Robert Marshall.
The shelters call for companies to “buy” assets such as buses and railcars from public agencies, and then “lease” them back while reaping a tax break on the purchases and income.
A similar vehicle, known as “lease in/lease out,” was outlawed in 2002.
The defendants including Chairman and Chief Executive John Stumpf, his predecessor Richard Kovacevich, and board members Enrique Hernandez, Cynthia Milligan, Philip Quigley, Judith Runstad, Susan Swenson, Lloyd Dean, Nicholas Moore, Susan Engel, Donald James, Richard McCormick and Stephen Sanger.
The shareholder derivative action, brought by Marshall and other investors on behalf of Wells Fargo against its managers, seeks the return of unspecified damages to the company.
(Reporting by Gina Keating; Editing by Richard Chang)