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Tolstedt adopted a metric, known as “cross-selling,” even though that metric was “inflated by unused, unnecessary or unauthorized accounts and services,” according to the SEC.
In other words, the former Wells Fargo executive bragged to investors about the number of different accounts clients had – despite the fact that millions of those accounts had been fabricated by employees trying to reach Totally unrealistic sales targets set by management.
In addition, the SEC said Tolstedt approved the accuracy of Wells Fargo’s public disclosures “when it knew or was reckless not to know” that the statements on the bank’s cross-selling metric were “materially false and misleading. “.
The SEC is asking for civil penalties against Tolstedt and wants to ban him from becoming a member of management or serving on a board of directors.
In a statement, Enu Mainigi, attorney at Williams & Connolly representing Tolstedt, defended her as 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 carefully verified by others as part of Wells Fargo’s policies, procedures and control systems,” said Mainigi. “Ms. Tolstedt acted appropriately, transparently and in good faith at all times. We look forward to setting the record straight and clearing her name.”
Stumpf, the former CEO, was accused by the SEC on Friday of signing and certifying statements in 2015 and 2016 about Wells Fargo’s cross-selling strategy and the measure he “should have known to be misleading.”
Even “after being warned that Wells Fargo was misleading the public about the cross-selling metric,” Stumpf “failed to ensure the accuracy of its certifications,” according to the SEC.
The SEC said Stumpf, “without admitting or denying the SEC’s findings,” agreed to pay a civil fine of $ 2.5 million and not to commit future violations. The agency said it plans to use the money to reimburse aggrieved investors.
A lawyer representing Stumpf declined to comment.
Wells Fargo declined to comment on the SEC accusations. A spokesperson pointed to a January post from Scharf calling the bank’s previous sales tactics “inexcusable” and calling for an effort to ensure that “such failures never happen again at Wells Fargo.”
At the time, Wells Fargo also recovered an additional $ 47 million from Tolstedt, arguing that it “resisted and prevented scrutiny or surveillance” and even “downplayed the extent and nature of the problems.”
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