Wells Threatened with Class Lawsuit Over Leak of Client/Advisor Data
(Updates with comments from Wells Fargo and number of advisors affected.)
A lawyer for former Wells Fargo Advisors broker Gary Sinderbrand is exploring bringing a class-action lawsuit against the firm over the accidental leak of production data on 7,900 brokers and account data on thousands of customers.
The information received from an outside Wells lawyer as part of a defamation case involving Sinderbrand’s former practice with his brother, and the release of a disc containing the data, may have violated several federal laws, including the Safeguards Rule of the Gramm Leach-Bliley Act, his lawyer wrote in a letter submitted to a New Jersey state superior court judge on Thursday.
“There is every indication that the disc contains evidence that Wells Fargo has potentially violated numerous federal statutes,” Michael Taaffe, a Sarasota, Fla.-based employment lawyer at Shumaker, Loop & Kendrick, wrote to Judge Julio L. Mendez.
Taaffe, who often represents brokers in disputes against firms, made the allegation in the course of arguments between Wells and Sinderbrand over who controls the disc with the sensitive data. Sinderbrand was ordered in July to give the disc to the court after he disclosed its receipt to a reporter at .
The disc included assets under management, production information and birth dates for 7,900 advisors, in addition to social security numbers and account information for 103,000 clients, Taaffe said. A Wells Fargo spokeswoman said that the number of clients affected is closer to 16,000.
Wells, which has succeeded in having Sinderbrand’s defamation claim and a related compensation claim in a New York court moved to arbitration, has asked Mendez to return the tape to the firm.
“Wells Fargo’s goal is to make the disc disappear and to engage in a ‘total do over, as if this never happened,’” Taaffe, a lawyer at Shumaker, Loop & Kendrick LLP in Sarasota, Florida, wrote.
There is a “significant concern that Wells Fargo would risk a hefty spoliation or sanctions fine in destroying the disc to avoid additional exposure of serious regulatory violations,” he wrote.
The Wells Fargo spokeswoman said the firm moved to protect the information as soon as it learned about its release, adding that the New Jersey court on Thursday granted a permanent injunction requiring the disc to be held by the bank’s law firm.
“Wells Fargo has taken responsibility in both filing court actions to protect the data…and by notifying any clients involved and helping them with this issue,” she said. “We sincerely apologize to our clients for any inconvenience or concern this incident caused.”
Taaffe, who was added to Sinderbrand’s legal team this week, negotiated a $13.6 million settlement of a class-action suit against Merrill Lynch on behalf of fired brokers seeking withheld compensation.
His letter to the New Jersey court said a putative class action lawsuit could focus on “matters surrounding the information contained on the disc, as well as its production and Wells Fargo’s subsequent actions or inactions upon its discovery of the data breach in question.”
Wells Fargo in July won a temporary restraining order that required Sinderbrand and his lawyers Aaron Zeisler in New York and Andrew L. Miller in New Jersey to refrain from “any further review, use and/or dissemination” of the disc and to turn it over to the court.
Taaffe and Ziesler are now seeking permission to allow Sinderbrand to discuss the contents of the disc with regulators, noting he has been contacted by the Financial Industry Regulatory Authority and the Securities and Exchange Commission.
“We believe the Court’s order precluding Mr. Sinderbrand from responding to inquiries from Finra and the SEC was not the Court’s intention and may violate state and federal laws concerning obstruction of justice and whistleblowing to the SEC or Finra,” he wrote.
The CD was sent to Sinderbrand by Bressler, Amery & Ross lawyer Angela Turiano as part of the legal discovery process. Turiano did not return a call for comment on the status of the cases.