The Securities and Exchange Commission says it settled with the former head of Wells Fargo & Co.’s Community Bank, Carrie L. Tolstedt. Tolstedt will be required to pay US$ 3 million for allegedly misleading investors about the success of the Community Bank, which the SEC calls “Wells Fargo’s core business.” The SEC also had also settled with then Wells Fargo CEO and Chairman, John Stumpf.
According to the SEC “From mid-2014 through mid-2016, Tolstedt publicly described and endorsed Wells Fargo’s “cross-sell metric” as a means of measuring Wells Fargo’s financial success despite the fact that this metric was inflated by accounts and services that were unused, unneeded, or unauthorized. The complaint further alleges that Tolstedt knew the cross-sell metric did not accurately track accounts or products that customers needed or used, since she was aware of misconduct at the Community Bank that led to bankers pushing products on customers that they did not need or want, including the unauthorized opening of accounts. The complaint alleges that Tolstedt made misleading public statements to investors at Wells Fargo’s investor conferences in 2014 and 2016, and 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.”
Monique C. Winkler, the Regional Director of the SEC’s San Francisco Regional Office, noted: “Companies do not act on their own. Where the facts warrant it, we will hold senior executives accountable for conduct that violates the securities laws.”
Tolstedt, without admitting or denying the SEC’s allegations, agreed to a final judgment permanently enjoining her from violating, or aiding and abetting violations of, the antifraud and other provisions of the federal securities laws and imposing a permanent officer-and-director bar. In addition to the US$ 3 million civil penalty, she will pay disgorgement of US$ 1,459,076 plus prejudgment interest of US$ 447,874.
The SEC’s complaint was filed in the U.S. District Court for the Northern District of California. The litigation was conducted by Susan LaMarca, Erin Wilk, Victor Hong, John Roscigno, and Horace Austin of the SEC’s San Francisco Regional Office. The case was supervised by Jason H. Lee and Ms. Winkler.
