- Wells Fargo to pay $65mn settlement for misleading investors cross-sell scandal.
- Follows CFPB, OCC Sep. 2016 $135mn Wells fine re secret accounts.
- Due to strict, unrealistic goals, employees engaged in fraudulent sales practices.
- Wells Fargo employees opened millions of fake deposit and credit card accounts.
- Employees were incentivized to meet the targets, with promotions and bonuses.
- Those who did not meet targets, faced relentless pressure and even termination.
- Wells did not disclose knowledge of systemic problems pervading sales practices.
- In 2011, board got reports on increasing numbers of allegations of sales abuses.
- In Congressional testimony, former CEO said he became aware of fraud in 2013.
Disclosure to Investors
- Cross-sell is a process, of selling new products or services to existing customers.
- Wells did not tell the investors, the fraudulent basis for cross-sell business model.
- When the truth was publicly disclosed, New York investors lost millions of dollars.
- Represented to investors ability to increase revenues and better serve customers
by superior cross-sell strategy; reported cross-sell metrics that reflected success.
- Failed to tell investors, that cross-sell success, built on sales practice misconduct.
- Bank fined $65mn, and settlement has no impact on other investigation of Wells.
- NYAG continues to investigate Wells Fargo related to its illegal business practices.