Former Chairman and CEO of Wells Fargo & Company Settles Charges

On November 13, 2020, John Stumpf, the former Chairman and Chief Executive Officer of Wells Fargo & Company, settled charges that he signed and certified misleading statements to the investing public that misstated a key performance metric. Stumpf and Wells Fargo publicly stated on numerous occasions that a core business strategy for the company, including its largest business unit, the Community Bank, was to “cross sell” to customers accounts and products that they needed and used. Wells Fargo published a Community Bank “cross-sell metric” in its Annual Reports, and in its quarterly reports, which Stumpf signed and certified when they were publicly filed with the Commission. In those reports, Wells Fargo described the cross-sell metric as measuring the number of accounts and products sold – and “used” – per retail bank household. Wells Fargo characterized its cross-selling strategy to investors as a key component of its financial success and publicly touted the Community Bank’s cross-sell metric as proof of its success at executing on this core business strategy.  In contrast to those public statements and disclosures about the purportedly “needs based” selling, Wells Fargo’s Community Bank had employed a volume-based sales model that incentivized employees to sell to existing customers, often with little regard to actual customer need or expected use. By 2015, the Community Bank’s model had led to thousands of its employees engaging in unlawful or unethical sales misconduct, including selling a significant number of accounts and products that customers did not need, want, or use. As Wells Fargo’s Chairman and CEO during the relevant time, Stumpf was required to certify the accuracy of the Company’s filings with the Commission, including certifying the accuracy of the disclosures contained in its annual and quarterly reports filed with the Commission with its Forms 10-K and 10-Q. Stumpf learned of facts that put, or should have put, him on notice about material inaccuracies in the Company’s statements about the Community Bank’s cross-selling strategy as well as the cross-sell metric it reported from the second quarter of 2015 through the second quarter of 2016. In attesting to the accuracy of the Company’s disclosures, Stumpf’s reliance on several senior officers, including the head of the Community Bank, who had assured Mr. Stumpf that the Company’s statements related to the cross-sell strategy and metric were accurate in all material respects, was unreasonable. Stumpf agreed to civil money penalty of $2,500,000. []