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November 13, 2020 at 09:24 AM
The Securities and Exchange Commission on Friday charged former Wells Fargo & Co. CEO and Chairman John Stumpf and former head of Wells Fargo’s Community Bank Carrie Tolstedt for their roles in allegedly misleading investors about the success of the Community Bank, Wells Fargo’s core business.
The SEC’s filings include settled charges against Stumpf, who agreed to pay a $2.5 million penalty, and a litigated action alleging Tolstedt committed fraud.
The SEC previously filed settled charges against Wells Fargo for engaging in the misconduct.
According to the SEC’s complaint against Tolstedt, from mid-2014 through mid-2016, Tolstedt publicly described and endorsed Wells Fargo’s “cross-sell metric” as a means of measuring the firm’s financial success despite the fact that this metric was inflated by accounts and services that were unused, unneeded or unauthorized.
The complaint further alleges that Tolstedt signed misleading sub-certifications as to the accuracy of Wells Fargo’s public disclosures when she knew or was reckless in not knowing that statements in those disclosures regarding Wells Fargo’s cross-sell metric were materially false and misleading.
The SEC’s order against Stumpf finds that in 2015 and 2016 he signed and certified statements filed with the commission, which he should have known were misleading, regarding both Wells Fargo’s Community Bank cross-sell strategy and its reported metric.
Wells Fargo said Friday: “We have commented on these historical issues in the past and have nothing to add.”
“Over the past three years, the company has made fundamental changes to its business model, compensation programs, leadership, and governance …,” CEO Charlie Scharf explained in January. “The company is different today, but we know we still have significant work to do to regain the trust of all stakeholders.”
In September 2016, Wells Fargo forced Stumpf to forfeit $41 million of stock, plus some salary. Tolstedt gave up unvested stock valued at about $19 million and agreed not to cash in outstanding options. Neither received a bonus for 2016.
Other Issues
A month ago, Wells Fargo said it was bringing together different parts of its Wealth and Investment Management unit and reportedly was exploring the sale of its Asset Management business. The bank also is reportedly considering the sale of its private-label credit card unit.
