Wells Fargo has agreed to pay $65 million as penalty under a settlement with New York’s Office of the Attorney General to resolve claims alleging that fraudulent statements it made in connection with its cross-sell business model and related sales practices caused New York investors to lose millions of dollars.
“The misconduct at Wells Fargo was widespread across the bank and at every level of management – impacting both customers and investors who were misled,” Attorney General Barbara Underwood said. “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.”
While the company represented to investors its ability to increase revenues through the cross-sell strategy and also regularly reported cross-sell metrics that supposedly reflected its success, it failed to disclose that the success was built on sales practice misconduct at the bank.
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. Despite knowledge by the Wells Fargo board and its former CEO of alleged misconduct, the company still failed to disclose it to investors.
“We are pleased to reach this agreement. Wells Fargo did not admit liability, and we believe that putting this matter behind us is in the best interest of all of our stakeholders, including customers. The settlement costs have been previously accrued,” the company said in a statement.
“We are making strong progress in our work to rebuild trust, and this represents another step forward. Over the past two years, we have made fundamental changes to retail sales practices, and the claims in this settlement relate to past product sales goals that were eliminated in 2016. We remain focused on transforming Wells Fargo into a better company for our customers and other stakeholders,” it added.
The attorney general’s office said it is continuing its investigation of Wells Fargo in connection with its illegal business practices of opening millions of unauthorized accounts and enrolling consumers in services without their knowledge or consent. The settlement has no impact on that ongoing investigation and other pending investigations of Wells Fargo.