The Securities and Exchange Commission (SEC) on Friday charged former Wells Fargo Chairman and CEO John Stumpf and the former head of Wells Fargo’s community bank, Carrie Tolstedt, for their roles in allegedly misleading investors about the success of the community banking arm, the division at the center of the bank’s 2016 fake accounts scandal.
The SEC said it settled charges against Stumpf for $2.5 million, and will litigate fraud charges against Tolstedt in court.
The charges are the latest in a series of penalties regulators have levied on Wells Fargo and former executives in connection to the scandal that involved employees opening millions of fake bank and credit card accounts to meet sales incentives.
In its complaint against Tolstedt, the SEC alleges the former community bank head publicly described and endorsed Wells Fargo’s "cross-sell metric" as a means of measuring Wells Fargo’s financial success, even though she knew the metric was "inflated by accounts and services that were unused, unneeded, or unauthorized."
"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 said. Tolstedt left the bank in 2016.
Stumpf, who served as the bank’s chief executive from 2007 to 2016, certified statements filed with the SEC regarding the bank’s cross-sell strategy, which the agency said he should have known were misleading.
"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.
"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 SEC’s charges follow actions the Office of the Comptroller of the Currency (OCC) took against Stumpf and Tolstedt in January.
The bank has also penalized the executives for their misconduct. In two separate actions in 2016 and 2017, Wells Fargo’s board of directors clawed back a total of $180 million in compensation from Stumpf and Tolstedt for their roles in the scandal.
As part of a deferred prosecution agreement, the Justice Department and the SEC levied a $3 billion fine against Wells Fargo in February in relation to the fraudulent sales practices.