John Stumpf, chief executive government agent of Wells Fargo & Co., waits to begin a House Financial Services Committee hearing in Washington, D.C., U.S., on Thursday, Sept. 29, 2016.
Andrew Harrer | Bloomberg | Getty Images
Ex-Wells Fargo CEO John Stumpf and latest deputy Carrie Tolstedt were charged by the Securities and Exchange Commission with misleading investors about the bank’s attainment in selling multiple products to customers.
Stumpf agreed to pay a $2.5 million civil penalty to resolve the matter, approving him to avoid admitting or denying the charges, the SEC said Friday.
The two executives had certified in 2015 and 2016 investor disclosures that promoted the firm’s supposedly robust “cross-sell” metric, despite knowing it was misleading, the SEC said in a statement. The metric is an industry semester for how many products a single customer has.
Wells Fargo was later found to have inflated that metric by get dressed in millions of customers into products without their consent, a scandal that cost Stumpf his job in 2016 and all the more that of his successor Tim Sloan. Current CEO Charlie Scharf took over a year ago and has been tasked with renovating the fourth biggest U.S. bank and satisfying regulators’ demands for better controls.
“If executives speak about a key performance metric to kick upstairs their business, they must do so fully and accurately,” said Stephanie Avakian, director of the SEC’s Division of Enforcement.
The SEC’s kick, filed in California, charges Tolstedt with fraud and seeks penalties and to ban her from being an officer or director of a exposed company.
According to the SEC’s complaint, Tolstedt publicly endorsed the firm’s vaunted cross-sell metric from 2014 into done with 2016, despite the fact that it was “inflated by accounts and services that were unused, unneeded, or unauthorized.”
In an e-mailed averral, Tolstedt’s lawyer Enu Mainigi called her client “an honest and conscientious executive.”
“It is unfair and unfounded for the SEC to point the finger at Ms. Tolstedt when her annunciations were not only true but also thoroughly vetted by others as part of Wells Fargo’s policies, procedures and organizations of controls,” Mainigi said. “Ms. Tolstedt acted appropriately, transparently and in good faith at all times. We look forward to environs the record straight and clearing her name.”
Earlier this year, Wells Fargo paid $3 billion to fall several U.S. probes into its operations, including a $500 million deal with the SEC. The regulator said it will issue money collected from Stumpf and the bank to investors.