Chancellor orders bank to turn over materials

A Hamilton County chancellor on Monday ordered Wells Fargo to turn over some documents related to a lawsuit filed more than a year ago by Chattanooga’s Fire and Police Pension Fund.

Hamilton County Chancellor Pam Fleenor gave Wells Fargo attorneys 60 days to provide the material to the fund, which is claiming its former trustee provided inaccurate information and violated its fiduciary duty by keeping rebate checks for placing pension investments in certain funds.

The chancellor limited the scope of the materials sought by the fund’s lawyers and who can see the info.

“That’s a good start,” said Fleenor, adding the other information “isn’t barred forever. We’re just getting started.”

Fund attorney Gary Patrick said the fund was seeking a financial accounting from Wells Fargo, which was its trustee from 2005 to last year.

He told the chancellor that Wells Fargo had received “kickbacks” from mutual funds in which the pension fund invested. Patrick said pension fund lawyers discovered “secret agreements” between Wells Fargo and some mutual funds.

Patrick said Wells Fargo may have received unauthorized compensation per its agreement with the pension fund.

“We asked Wells Fargo for copies of these secret agreements to see how much money was taken,” he said. “We don’t know how much money Wells Fargo received.”

However, Wells Fargo attorney Cheryl Haas said that she was surprised the case was before the chancellor and that it was “shocking we’re here at all.”

“We’ve agreed to provide an accounting,” she said, adding that’s it’s wrong to assert that Wells Fargo took money from the fund.

Haas also objected to the term kickback.

“There’s simply no undisclosed compensation here,” she said.

Haas said the bank had agreed to the accounting as long as there was a protective order to ensure the confidentiality of the materials.

Patrick has alleged that Wells Fargo provided inaccurate and incomplete disclosures to the fund. He cited instances in which Wells Fargo had earlier issued corrections to statements it had made.

Wells Fargo had earlier acknowledged that “because there was a change directed by the client in 2017, it made an error in setting up the revenue sharing associated with that change appropriately and the revenue share rebates did not occur as intended.”

“We are sorry this error occurred, and upon discovery the issue was fixed and the total revenue share received from the third party fund companies [approximately $15,000] was returned to the pension fund,” the bank said earlier.

Since 2010, the pension fund charged in the lawsuit Wells Fargo had improperly retained $47,000 belonging to the fund, which holds more than $200 million in assets for 1,600 participants.

While the lawsuit started in Chancery Court, it was later transferred to federal court. But that body declined to hear the case and sent it back to Chancery Court.