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Ex-Wells Fargo CEO John Stumpf misled investors in fake accounts scandal, SEC saysEx-Wells Fargo CEO John Stumpf and his former deputy Carrie Tolstedt were charged by the Securities and Exchange Commission with misleading investors about the bank's success in selling multiple products to customers.
Stumpf agreed to pay a $2.5 million civil penalty to resolve the matter, allowing him to avoid admitting or denying the SEC's charges.
© Provided by CNBC John Stumpf, chief executive officer of Wells Fargo & Co., waits to begin a House Financial Services Committee hearing in Washington, D.C., U.S., on Thursday, Sept. 29, 2016.
Ex-Wells Fargo CEO John Stumpf and former deputy Carrie Tolstedt were charged by the Securities and Exchange Commission with misleading investors about the bank's success in selling multiple products to customers.
Stumpf agreed to pay a $2.5 million civil penalty to resolve the matter, allowing him to avoid admitting or denying the charges, the SEC said Friday.
The two executives had certified in 2015 and 2016 investor disclosures that touted the firm's supposedly robust "cross-sell" metric, despite knowing it was misleading, the SEC said in a statement. The metric is an industry term for how many products a single customer has.
Wells Fargo was later found to have inflated that metric by putting millions of customers into products without their consent, a scandal that cost Stumpf his job in 2016 and even that of his successor Tim Sloan. Current CEO Charlie Scharf took over a year ago and has been tasked with overhauling the fourth biggest U.S. bank and satisfying regulators' demands for better controls.
"If executives speak about a key performance metric to promote their business, they must do so fully and accurately," said Stephanie Avakian, director of the SEC's Division of Enforcement.
The SEC's complaint, filed in California, charges Tolstedt with fraud and seeks penalties and to ban her from being an officer or director of a public company.
According to the SEC's complaint, Tolstedt publicly endorsed the firm's vaunted cross-sell metric from 2014 through 2016, despite the fact that it was "inflated by accounts and services that were unused, unneeded, or unauthorized."
Earlier this year, Wells Fargo paid $3 billion to settle several U.S. probes into its operations, including a $500 million deal with the SEC. The regulator said it will distribute money collected from Stumpf and the bank to investors.
Ex-Wells Fargo CEO John Stumpf and former deputy Carrie Tolstedt were charged by the Securities and Exchange Commission with misleading investors about the bank's success in selling multiple products to customers.
Stumpf agreed to pay a $2.5 million civil penalty to resolve the matter, allowing him to avoid admitting or denying the charges, the SEC said Friday.
The two executives had certified in 2015 and 2016 investor disclosures that touted the firm's supposedly robust "cross-sell" metric, despite knowing it was misleading, the SEC said in a statement. The metric is an industry term for how many products a single customer has.
Wells Fargo was later found to have inflated that metric by putting millions of customers into products without their consent, a scandal that cost Stumpf his job in 2016 and even that of his successor Tim Sloan. Current CEO Charlie Scharf took over a year ago and has been tasked with overhauling the fourth biggest U.S. bank and satisfying regulators' demands for better controls.
"If executives speak about a key performance metric to promote their business, they must do so fully and accurately," said Stephanie Avakian, director of the SEC's Division of Enforcement.
The SEC's complaint, filed in California, charges Tolstedt with fraud and seeks penalties and to ban her from being an officer or director of a public company.
According to the SEC's complaint, Tolstedt publicly endorsed the firm's vaunted cross-sell metric from 2014 through 2016, despite the fact that it was "inflated by accounts and services that were unused, unneeded, or unauthorized."
Earlier this year, Wells Fargo paid $3 billion to settle several U.S. probes into its operations, including a $500 million deal with the SEC. The regulator said it will distribute money collected from Stumpf and the bank to investors.
SEC charges Wells Fargo's former CEO and top executive for misleading investors over success of its core business
snagarajan@businessinsider.com (Shalini Nagarajan)
The Securities and Exchange Commission charged former Wells Fargo CEO John Stumpf together with another top executive on Friday for intentionally misleading investors over the US bank's core business.
Carrie Tolsted, former community bank chief, is said to have known that a key selling metric was inflated, but used it as a measure of success anyhow.
The former CEO has agreed to pay a $2.5 million penalty, and the regulator will litigate fraud charges against Tolstedt in court.
The US SEC has charged former Wells Fargo CEO John Stumpf for misleading investors over the success of its core business, according to a Friday filing.
Former community bank head Carrie Tolsted has been hit with the same charge. From mid-2014 through mid-2016, Tolsted is said to have trumpeted the bank's key selling metric as a measure of success. The metric was actually fraudulent and inflated, based on accounts and services that were "unused, unneeded, or unauthorized," the SEC said.
Tolsted signed misleading documents about the bank "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 regulator said.
Former CEO Stumpf signed and certified documents with the regulator in 2015 and 2016, while he should have been aware of their misleading nature, the SEC said.
"According to the order, Stumpf failed to assure the accuracy of his certifications after being put on notice that Wells Fargo was misleading the public about the cross-sell metric," the SEC said.
In response to the latest charge, Wells Fargo reiterated a previous statement that at the time of its sales practice issues, the bank didn't have "appropriate people, structure, processes, controls, or culture to prevent the inappropriate conduct."
Stumpf agreed to pay a $2.5 million penalty to settle the agency's charges, and the regulator will litigate fraud charges against Tolstedt in court.
"If executives speak about a key performance metric to promote their business, they must do so fully and accurately," Stephanie Avakian, director of the SEC's Division of Enforcement said in a statement. "The Commission will continue to hold responsible not only the senior executives who make false and misleading statements but also those who certify to the accuracy of misleading statements despite warnings to the contrary."
snagarajan@businessinsider.com (Shalini Nagarajan)
© Win McNamee/Getty Images John Stumpf, former Wells Fargo CEO and Chairman.
The Securities and Exchange Commission charged former Wells Fargo CEO John Stumpf together with another top executive on Friday for intentionally misleading investors over the US bank's core business.
Carrie Tolsted, former community bank chief, is said to have known that a key selling metric was inflated, but used it as a measure of success anyhow.
Stumpf signed and certified documents with the SEC in 2015 and 2016 when he should have known they were misleading, the regulator said.
The former CEO has agreed to pay a $2.5 million penalty, and the regulator will litigate fraud charges against Tolstedt in court.
The US SEC has charged former Wells Fargo CEO John Stumpf for misleading investors over the success of its core business, according to a Friday filing.
Former community bank head Carrie Tolsted has been hit with the same charge. From mid-2014 through mid-2016, Tolsted is said to have trumpeted the bank's key selling metric as a measure of success. The metric was actually fraudulent and inflated, based on accounts and services that were "unused, unneeded, or unauthorized," the SEC said.
Tolsted signed misleading documents about the bank "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 regulator said.
Former CEO Stumpf signed and certified documents with the regulator in 2015 and 2016, while he should have been aware of their misleading nature, the SEC said.
"According to the order, Stumpf failed to assure the accuracy of his certifications after being put on notice that Wells Fargo was misleading the public about the cross-sell metric," the SEC said.
In response to the latest charge, Wells Fargo reiterated a previous statement that at the time of its sales practice issues, the bank didn't have "appropriate people, structure, processes, controls, or culture to prevent the inappropriate conduct."
Stumpf agreed to pay a $2.5 million penalty to settle the agency's charges, and the regulator will litigate fraud charges against Tolstedt in court.
"If executives speak about a key performance metric to promote their business, they must do so fully and accurately," Stephanie Avakian, director of the SEC's Division of Enforcement said in a statement. "The Commission will continue to hold responsible not only the senior executives who make false and misleading statements but also those who certify to the accuracy of misleading statements despite warnings to the contrary."
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