描述
Wells Fargo Failed to Disclose to Investors that Success of Cross-Sell Efforts was Built on Opening Millions of Fake Deposit and Credit Card Accounts; NY Investors Lost Millions when Misconduct was Disclosed. Settlement Marks Latest Martin Act Enforcement Action to Protect NY Investors and Integrity of Financial Marketplace
Attorney General Barbara D. Underwood announced today that Wells Fargo & Company will pay a $65 million penalty following the Attorney General’s investigation into the bank’s fraudulent statements to investors in connection with its “cross-sell” business model, related sales practices, and the bank’s publicly reported cross-sell metrics. “The misconduct at Wells Fargo was widespread across the bank and at every level of management – impacting both customers and investors who were misled,” said Attorney General Underwood. “State securities laws are vital to protecting the hard-earned savings of working families and Main Street investors from financial fraud, and my office will continue to do what’s necessary to protect the public and the integrity of our markets.”
“Cross-sell” refers to the process of selling new financial products and/or services to an existing customer. Wells Fargo represented to investors its ability to increase revenues and better serve customers by pursuing its purportedly superior cross-sell strategy; it also regularly reported cross-sell metrics that supposedly reflected the success of that strategy.
However, Wells Fargo failed to disclose to investors that the success of its cross-sell efforts was built on sales practice misconduct at the bank. Driven by strict and unrealistic sales goals, employees in Wells Fargo’s Community Bank division engaged in fraudulent sales practices, including the opening of millions of fake deposit and credit card accounts without customers’ knowledge. Through a significant incentive compensation program, employees who met these targets were eligible for promotions and bonuses, while employees who did not meet the sales targets faced relentless pressure and even termination.
Today's settlement notes that Wells Fargo made numerous misrepresentations to investors over many years, and failed to disclose its knowledge of systemic problems pervading the bank’s sales practices. In one email from June 2011, a member of the incentive compensation team acknowledged this misconduct by Wells Fargo employees, stating that “I’ve asked bankers… why people cheat… it’s because their manager tells them they’ll be fired if they don’t hit their minimums.” Beginning as early as 2011, Wells Fargo’s Board of Directors received reports that described increasing numbers of allegations of this sales practice misconduct by its employees. In Congressional testimony, Wells Fargo’s former CEO stated that he personally became aware of widespread fraud by Wells Fargo employees in 2013. Yet Wells Fargo failed to disclose to investors the misconduct at the heart of the bank’s vaunted cross-sell business model. When the truth was publicly disclosed, New York investors lost millions of dollars. For more info visit https://web.archive.org/web/20190101065626/https://ag.ny.gov/press-release/ag-underwood-announces-65-million-settlement-wells-fargo-misleading-investors
