Wells Fargo Ex-CEO Ordered to Pay $2.5M Over Scandal
The U.S. Securities and Exchange Commission (SEC) filed and settled civil charges against John Stumpf, former chairman and CEO of Wells Fargo, stemming from his role in the bank’s sales practices scandal.
Mr. Stumpf agreed to pay a $2.5M fine to resolve the agency’s allegations that he signed and approved statements that deceived investors through 2015 and 2016 regarding the firm’s use of so-called cross-sell metrics that could measure financial success.
Wells Fargo Settled With The SEC For 500M
According to authorities, Mr. Stumpf knew that these metrics inflated accounts and services, potentially harming investors and clients.
But, this is not Wells Fargo’s first impasse with the authorities. Earlier this year, the bank reached a $500M settlement with the SEC — which came as part of a broader $3B resolution with the government over the same sales practices scandal that resulted in Mr. Stumpf’s resignation.
Stephanie Avakian, director of the SEC’s Division of Enforcement, explained in a statement that if executives speak about a key performance metric that helps promote their businesses, they must do so fully and truthfully.
She added that the Commission would continue to hold responsible anyone who makes false and misleading statements or any executive who certifies fraudulent statements’ accuracy.
Firm Misconduct Reported As Far Back As 2016
According to reports, back in January, Mr. Stumpf agreed to pay $17.5M in fines and was banned by the Office of the Comptroller of the Currency (OCC.)
Plus, the federal regulator also fined two former Wells Fargo officers and launched actions against five former executives, including the ex-head of Wells Fargo’s Community Bank, Carrie L. Tolstedt.
Accusations of widespread misconduct at the firm first erupted in September 2016 when Wells Fargo agreed to pay $185M in fines to the OCC, the Consumer Financial Protection Bureau, and the city of Los Angeles to resolve several claims.
According to the OCC, bank employees opened millions of accounts for clients without them knowing to meet their aggressive sales targets and earn incentives. Based on their findings, these irregular practices derived from the retail bank’s business model, based on cross-selling as many products as possible to existing customers. A structure that supposed intentionally unreasonable sales goals and excessive pressure for employees.
Since then, the firm has faced several other accusations, including illegally repossessing military service members’ vehicles, inappropriately charging fees to mortgage customers for rate-lock extensions, and charging auto-loan borrowers for unnecessary collateral protection insurance.
OCC & CFPB Charged Strumpf 1 Billion In Penalties
These scandals have led to various lawsuits and severe penalties from regulators, including an unparalleled $2 trillion bank size cap from the Federal Reserve and $1 billion in settlements with the OCC and CFPB.
In the process of settling claims against Mr. Stumpf earlier this year, the OCC also went after Mr. Tolstedt and four other bank officials who supposedly ignored ill practices across the entire Community Bank, the retail banking arm of Wells Fargo.
The SEC made similar claims against Mr. Tolstedt in a complaint in California federal court and is seeking officer and director bars as well as a fine and disgorgement of ill-gotten gains.
In a statement, authorities explained that Mr. Stumpf and other executives knew about inaccuracies in statements, demonstrating the extent of the sales misconduct within the Community Bank and how it manifested an ongoing conflict with its public statements about its core, cross-selling strategy.
Without admitting or denying the regulator’s allegations, Mr. Stumpf consented to settle the SEC’s case with a $2.5M penalty. Those funds will be combined with the $500 million Wells Fargo settlement and used to reimburse the fraud investors and victims.
Speak with a Securities Fraud Attorney
Dimond Kaplan & Rothstein, P.A. has vast experience with cases related to securities fraud schemes. The firm has successfully represented numerous securities fraud victims who have lost money as a result of securities schemes throughout the country and recovered losses for clients.
Contact Dimond Kaplan & Rothstein Today
To learn more about your rights and options, contact an experienced securities fraud attorney at Dimond Kaplan & Rothstein, P.A. to schedule an appointment for a FREE case evaluation.
Contact an investment fraud attorney at Dimond Kaplan & Rothstein, P.A. to schedule a FREE case evaluation. Our offices are located in Los Angeles, New York, Detroit, West Palm Beach, Naples, and Miami, and we represent clients nationwide. Translation services are available