Ex-Wells Fargo CEO John Stumpf has misled traders right into a faux account scandal, SEC says
John Stumpf, CEO of Wells Fargo & Co., waits to begin a House Financial Services Committee hearing in Washington, DC, USA on Thursday, September 29, 2016.
Andrew Harrer | Bloomberg | Getty Images
Ex-Wells Fargo CEO John Stumpf and former Deputy Carrie Tolstedt have been accused by the Securities and Exchange Commission of informing misleading investors about the bank’s success in selling multiple products to customers.
Stumpf agreed to pay a $ 2.5 million civil fine to settle the matter so that he could not admit or deny the charges, the SEC said Friday.
The two executives had confirmed information from investors in 2015 and 2016 that touted the company’s allegedly robust “cross-sell” metric even though they knew it was misleading, the SEC said in a statement. The metric is an industry term for the number of products a single customer has.
It was later revealed that Wells Fargo had inflated that metric by putting millions of customers into products without their consent. This scandal cost Stumpf his job in 2016 and even that of his successor Tim Sloan. The current CEO, Charlie Scharf, took on the task of overtaking the fourth largest US bank over a year ago and fulfilling regulatory demands for better controls.
“When executives talk about an important performance metric to help their business grow, it must be complete and accurate,” said Stephanie Avakian, director of the SEC’s enforcement department.
The SEC complaint filed in California accuses Tolstedt of fraud and seeks fines and prohibits her from serving as an officer or director of a public company.
According to the SEC’s complaint, Tolstedt publicly endorsed the company’s 2014-2016 cross-selling metric despite being “inflated by accounts and services that weren’t used, needed, or unauthorized.”
Earlier this year, Wells Fargo paid $ 3 billion to start operating several US probes, including a $ 500 million deal with the SEC. The regulator said it would distribute the money raised by Stumpf and the bank to investors.