Wells Fargo & Co. bungled the 2020 sale of Occidental Petroleum Corp. shares on behalf of an employee trust, a judge in Texas ruled. Because the bank failed to execute trades as planned before the Covid-19 pandemic tanked the stock market, the trust experienced tens millions of dollars in losses.
U.S. District Judge Lee Rosenthal of Houston said she will decide later how much the bank must pay Occidental in damages, after lawyers provide more detail on losses suffered by the energy company's so-called "rabbi trust," which was used to compensate certain executives.
The value of the assets held in the trust was "$39.4 million less than they would have been had the stock been sold according to the parties' agreement," Rosenthal said in a 38-page ruling handed down on Wednesday. The judge indicated the final damage award may be higher because Occidental claims it lost the opportunity to invest the cash it had hoped to receive.
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Wells Fargo didn't dispute that the share sale failed to go according to plan. But the bank disagrees with the impact on its client.
A spokesperson for Wells Fargo didn't immediately return a messages seeking comment.
The bank had agreed in December 2019 to sell equal tranches of 381,420 Occidental shares every day for a week, beginning January 6, 2020, when prices were around $45 to $47 a share, court filings show. An employee who had never handled such a large transaction sold 381,420 shares on one day in January, but sold no shares at all on three of the planned days, records show.
By early March, the value of Occidental's shares had fallen to around $11 per share. On March 20, two months after the agreed-upon sale period, the bank dumped 1.1 million shares in a bulk transaction, driving the company's share price to $9.98. That kind of price collapse was what the oil company had hoped to avoid through a staged sale that didn't flood the market.
Judge Rosenthal also denied Wells Fargo's bid to shift at least some of the blame to Occidental and its custodial intermediary, which also mishandled aspects of the planned share sale. The judge gave the parties until September 9 to outline how she should proceed.
The case is Occidental Petroleum v. Wells Fargo, 4:21-1126, US District Court, Southern District of Texas (Houston).
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