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Fort Lauderdale, FL— Attorneys this week debated whether Wells Fargo mismanaged a massive trust fund intended for thousands of children who are members of Florida’s Seminole Tribe, as trial opened against the banking giant. Gopher, et al. v. Wells Fargo, et al.
At the heart of the case is a trust created for the benefit of minor members of the Seminole Tribe of Florida, using revenue from the Tribe’s casino operations. Wells Fargo, as successor-in-interest to Wachovia Bank, acted as trustee from 2005 until it resigned from the position in 2016. Plaintiffs, including the current trustee and others, claim Wells Fargo charged millions of dollars in improper fees and mismanaged the trust fund investments, leading to hundreds of millions more in damages.
During Wednesday’s openings, Conrad & Scherer’s Steven Osber told jurors that the banking giant charged unauthorized fees to the trust for years, which amounted to “double-dipping” on the fee charges.
He also contended that the bank did not follow the “prudent investor rule” when investing trust funds, failing to invest in stocks or otherwise properly diversify the trust’s portfolio. Osber said evidence would show that when Wells Fargo discovered their actions, they improperly amended the trust to cover up the mismanagement.
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“The trustee knew the rules, they ignored the rules, they broke the rules, they breached their fiduciary duties to the minors,” Osber said. “And they caused significant damages to the minors’ trust.”
Conrad & Scherer’s Irwin Gilbert added that evidence would show that the trust suffered more than $800 million in damages from the faulty investment strategy and more than $7 million from the unauthorized charges.
But Wells Fargo contends it acted according to the trust’s overarching terms. During his opening statement Thursday, Winston & Strawn’s Thomas Melsheimer said the trust was established with the primary goal of protecting and preserving trust assets, requiring a conservative approach in investments.
Melsheimer said this approach was fueled by the Seminole Tribe’s loss of stock market investments years earlier, which colored its approach to the trust.
And while Melsheimer acknowledged that some fees charged for servicing the trust had not been published on a fee schedule as required, he pushed back on claims that the fees were imposed in bad faith, telling jurors the bank returned more than $1 million of those charges.
Melsheimer added that the trust itself provided that Wells Fargo and its agents could only be liable if they committed willful malfeasance or acted in bad faith.
“This is not a case about whether Wells Fargo made a mistake or acted negligently, or that another trustee might have done things differently,” Melsheimer said.
Trial in the case is expected to run as long as six weeks.
Email Arlin Crisco at acrisco@cvn.com.
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