ALBANY, N.Y.—Wells Fargo has been hit with yet another fine for its banking practices.
New York Attorney General Barbara D. Underwood announced 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 Underwood in a statement. “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.
“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,” continued Underwood.
Failure to Disclose
“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,” the AG’s office stated. “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.”
The 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,’” the AG said.