The Securities & Exchange Commission today announced its settlement with the former head of Wells Fargo & Co.’s Community Bank, Carrie L. Tolstedt, in which she has agreed to pay a $3 million penalty stemming from charges brought in 2020 for her role in allegedly misleading investors about the success of the Community Bank, Wells Fargo’s core business. The SEC previously settled related charges against Wells Fargo & its former CEO & Chairman, John Stumpf.
According to the SEC’s complaint against Tolstedt, from mid-2014 through mid-2016, Tolstedt publicly described & 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 & 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 & 2016, & 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 & misleading.
“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,” said Monique C. Winkler, Regional Director of the SEC’s San Francisco Regional Office.
Tolstedt, without admitting or denying the SEC’s allegations, agreed to a final judgment permanently enjoining her from violating, or aiding & abetting violations of, the antifraud & other provisions of the federal securities laws & imposing a permanent officer-&-director bar. In addition to the $3 million civil penalty, Tolstedt agreed to pay disgorgement of $1,459,076 plus prejudgment interest of $447,874. The SEC will combine this money with $500 million paid by Wells Fargo & the $2.5 million penalty paid by Stumpf in previous settlements & distribute the sum to harmed investors. The settlement is subject to court approval.
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, & Horace Austin of the SEC’s San Francisco Regional Office. The case was supervised by Jason H. Lee & Ms. Winkler.