Ex-Wells Fargo CEO John Stumpf has misled traders on account fraud: SEC
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 his former deputy Carrie Tolstedt were accused on Thursday by the Securities and Exchange Commission of misleading investors about the bank’s success in selling multiple products to customers.
The bank’s two former market leaders confirmed in 2015 and 2016 reports from investors announcing the company’s supposedly robust “cross-sell” metric, an industry term for the number of products a single customer has despite knowing that the metric was misleading, the SEC said in a statement.
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 drive their business, they must do it completely and accurately,” said Stephanie Avakian, director of the SEC’s enforcement department, in the statement.
Stumpf agreed to pay a civil penalty of $ 2.5 million to resolve the matter. This enabled him to avoid admitting or denying the SEC’s indictment. The SEC complaint filed in California accuses Tolstedt of fraud, imposes fines, and bans her from serving as an officer or director of a public company.
According to the SEC’s complaint against them, 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 power a number of 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.