The Securities and Exchange Commission (SEC) on Friday filed charges against two former Wells Fargo executives for allegedly misleading investors in the bank by using sales figures inflated by unauthorized and unwanted products.
The stock market regulator charged former Wells Fargo chief executive John Stumpf and Carrie Tolstedt, who oversaw Wells Fargo’s consumer banking operations, with violating federal anti-fraud rules for securities.
The SEC alleged that Stumpf and Tolstedt defrauded Wells Fargo shareholders by touting the bank’s “cross-sell metric” — a figure that tracked the average number of products sold to households.
Both Stumpf and Tolstedt made public statements and certified disclosures that cited the cross-sell metric as an indication of the company’s success despite several internal and external reports that the bank was selling millions of customers unwanted products and charging them for accounts they never agreed to open.
Stumpf agreed to pay a $2.5 million fine to settle charges with the SEC without admitting to or denying the allegations. He paid a $17.5 million fine to settle related charges filed by the Office of the Comptroller of the Currency (OCC) in January and was forced to surrender $41 million in compensation from Wells Fargo back to the bank in 2016.
In a complaint filed in the U.S. District Court for the Northern District of California, the SEC has asked the court to permanently ban Tolstedt from serving as an officer or director of any publicly traded company, force her to pay fines, and require her to surrender compensation earned through the conduct at the center of its charges. Tolstedt was also charged by the OCC for related alleged offenses in January 2020 and was forced by Wells Fargo in 2016 to forfeit roughly $19 million in company stock.
Tolstedt’s attorney, Williams & Connolly partner Enu Mainigi, called her “an honest and conscientious executive” and disputed the SEC’s charges.
“It is unfair and unfounded for the SEC to point the finger at Ms. Tolstedt when her statements were not only true but also thoroughly vetted by others as part of Wells Fargo’s policies, procedures and systems of controls,” Mainigi said in a statement.
“Ms. Tolstedt acted appropriately, transparently and in good faith at all times. We look forward to setting the record straight and clearing her name.”
The charges against Stumpf and Tolstedt are the latest chapter in the fallout from nearly a decade of sales scandals at Wells Fargo. The bank has paid billions of dollars in fines to federal and state officials and legal settlements, admitting to charging millions of customers for unnecessary or unauthorized accounts.
Wells Fargo was also fined $1 billion by federal regulators for forcing customers to buy unnecessary auto insurance policies and failing to make promised interest-rate adjustments on hundreds of home and auto loans.