Former Wells Fargo CEO John Stumpf has agreed to pay $2.5 million to settle charges brought by the Securities and Exchange Commission on Friday for his role in misleading investors in connection with the bank’s infamous fake account scandal.
Stumpf, who neither admitted nor denied the SEC’s findings, agreed to a cease-and-desist order. Also charged by the SEC was former Wells Fargo Community Bank head Carrie Tolstedt, who has not settled and will face litigation under allegations of fraud.
The penalty is the second Stumpf has incurred in the wake of the fake account scandal, which Wells Fargo agreed to pay $3 billion to resolve earlier this year. In January, the Office of the Comptroller of the Currency (OCC) fined Stumpf $17.5 million and banned him from the banking industry for his failure to “prevent the bank from recklessly engaging in unsafe or unsound practices.”
In its administrative proceeding, the SEC alleged Stumpf in 2015 and 2016 signed and certified statements filed with the Commission that he “should have known were misleading, regarding both Wells Fargo’s Community Bank cross-sell strategy and its reported metric.” 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,” said Stephanie Avakian, director of the SEC’s Division of Enforcement, in a press release. “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.”
Regarding Tolstedt, the SEC alleged the former Community Bank head publicly described and endorsed Wells Fargo’s cross-selling tactics “despite the fact that this metric was inflated by accounts and services that were unused, unneeded, or unauthorized,” in addition to signing “misleading sub-certifications as to the accuracy of Wells Fargo’s public disclosures.”
Tolstedt is already facing a $25 million penalty proposed by the OCC in January for her role in the scandal.