The Securities and Exchange Commission (SEC) has levied a $2.5 million fine on former Wells Fargo chief executive and chairman John Stumpf for his role in the fake accounts scandal.
In a press release published on November 13, the regulator said it had also charged Carrie Tolstedt, former head of the financial services giant’s community bank, with “violating the antifraud provisions of the federal securities laws”.
Stumpf has neither admitted nor denied the charges but agreed to the fine and to “cease and desist from committing or causing any future violations”.
In 2015 and 2016, the SEC alleged, Stumpf signed off on regulatory filing that “he should have known were misleading” regarding a “cross-sell strategy” used by the bank that resulted in staff setting up more than 500,000 fake credit cards and 1.5 million fake deposit accounts in customers’ names in order to hit targets.
The regulator claimed Stumpf had “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”.
Stumpf’s fine follows a $17.5 million penalty levied by the Office for the Comptroller of the Currency (OCC) in February.
The SEC has not completed its proceedings against Tolstedt. It said it was seeking “a permanent injunction, civil penalties, disgorgement with prejudgment interest, and an officer-and-director bar”.
According to the SEC’s complaint against Tolstedt, between 2014 and 2016 she “publicly described and endorsed” the cross-sell metric “despite the fact that this metric was inflated by accounts and services that were unused, unneeded, or unauthorized”.
The regulator added: “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.”
Richard Strassberg, an attorney for Stumpf, declined to comment to the Financial Times, while Enu Mainigi, an attorney for Tolstedt, told the newspaper: “Ms Tolstedt was an honest and conscientious executive. 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.
“Ms Tolstedt acted appropriately, transparently and in good faith at all times. We look forward to setting the record straight and clearing her name.”
“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 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.”
Stumpf’s penalty will be distributed to affected consumers along with the $500 million fine levied on Wells Fargo earlier this year.
The bank was forced to pay penalties of $3 billion to US regulators in February this year, while its former chief administration officer and chief risk officer were both fined seven-figure sums by the OCC.
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