Wells Fargo Ex-CEO Stumpf Pays $2.5 Million to Settle SEC Charges He Misled Investors

Former Community Bank head Carrie Tolstedt has also been charged by the regulator.


Former Wells Fargo CEO and Chairman John Stumpf has agreed to pay the US Securities and Exchange Commission (SEC) $2.5 million to settle charges that he misled investors about the success of Wells Fargo’s core business, Community Bank.

Wells Fargo has already forked over $500 million to settle SEC charges related to the matter, and the regulator said it will combine Stumpf’s fine with that money to distribute to harmed investors. Stumpf neither admitted nor denied the SEC’s charges.

According to the SEC’s order, in 2015 and 2016, Stumpf allegedly signed and certified statements that were filed with the regulator regarding Wells Fargo’s Community Bank cross-sell strategy and its reported metric that the SEC said he should have known were misleading. The SEC also alleged Stumpf failed to assure the accuracy of his certifications even after being put on notice that Wells Fargo was misleading the public about the cross-sell metric.

“If executives speak about a key performance metric to promote their business, they must do so fully and accurately,” Stephanie Avakian, director of the SEC’s Division of Enforcement, said in a statement. “The commission will continue to hold responsible not only the senior executives who make false and misleading statements but also those who certify to the accuracy of misleading statements despite warnings to the contrary.”

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The SEC has also filed charges against Carrie Tolstedt, the former head of Wells Fargo’s Community Bank, alleging that she joined Stumpf in making misleading claims to investors.  

According to the SEC’s complaint against Tolstedt, from mid-2014 through mid-2016, she allegedly publicly described and endorsed Wells Fargo’s cross-sell metric as a means of measuring Wells Fargo’s financial success. However, the SEC claims the metric was inflated by accounts and services that were neither used, needed, nor authorized. The complaint also alleges Tolstedt signed misleading sub-certifications as to the accuracy of Wells Fargo’s public disclosures that she either knew, or should have known, were materially false and misleading.

“Tolstedt publicly described the cross-sell metric as a means of measuring Wells Fargo’s relationships with its customers,” the SEC said in its complaint. “Yet, as Tolstedt knew or was reckless in not knowing, the cross-sell metric appeared to be growing for years as it captured growth in products that resulted from rampant sales misconduct rather than measuring products that customers wanted, needed, and used.”

The SEC has charged Tolstedt with violating the antifraud provisions of the federal securities laws and is seeking a permanent injunction, civil penalties, disgorgement with prejudgment interest, and an officer-and-director bar.

Enu Mainigi, Tolstedt’s lawyer, said in a statement that “it is unfair and unfounded for the SEC to point the finger at Ms. Tolstedt when her statements were not only true but also thoroughly vetted by others as part of Wells Fargo’s policies, procedures, and systems of controls.” 

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Kentucky Eyes Paying More to Fill Vacant Pension CIO Slot

Right now, the investment head can’t earn a salary above the governor’s $167,000, half what the chief could make elsewhere.


The Kentucky retirement program, currently in the middle of a nationwide search for its next investment chief, wants lawmakers to lift the low ceiling on what it can pay the CIO. 

Modest salaries were the main reason the state pension fund’s most recent CIO, Rich Robben, and deputy CIO Andy Kiehl left at the end of September for investment consulting jobs at Florida-based AndCo Consulting. They are the latest in a revolving door of CIOs.

“They told me in exit interviews that compensation is a big problem. And they said, ‘You can quote us on that,’” Kentucky Retirement Systems (KRS) Executive Director David Eager said during a Thursday board meeting.

Attracting investment talent is a tough order for public pension funds, which have to compete not only for a small pool of allocator talent with other defined benefit (DB) plans, but also with the private sector that can offer investors more lucrative salaries. 

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But Eager, who is leading the internal search for the next investment chief, said he hopes to rectify that situation soon. Thus far, the executive director has reviewed 14 candidates for the job, three of whom he said he found well qualified for the job, with résumés still coming in. 

KRS is seeking a compensation waiver for the investment chief position from the state legislature. Under state regulation, Kentucky government personnel, with few exceptions, cannot earn more than the state’s governor, whose salary is $167,000, according to Eager. Former KRS CIO Robben earned $165,000 per year, while former deputy CIO Kiehl took home $159,000. Similar positions at different public pensions can easily offer double those salaries. 

The pension fund is seeking a waiver from the regulation so that it can start offering future investment chiefs more money. Eager said he thinks there’s a strong chance a waiver will be approved by the legislature, which is not expected to start its session until January. 

“If we get the waiver—which I think we will, a pretty strong senator is supporting it—we should be in a lot better position,” Eager said during the meeting. (He did not clarify which state senator was his ally on the issue.)

Location is another matter. About a year and a half ago, KRS moved the investment team office to Louisville from Frankfort, a shift that the fund hopes will attract more candidates because the larger metro area has more to offer.

A salary boost could help KRS halt its revolving door of CIOs. The state retirement system has gone through five of them in the past 13 years, including Robben; David Peden, now a consultant at Mercer subsidiary Pavilion; TJ Carlson, now CIO at Texas Municipal; Adam Tosh, now senior portfolio manager in Alaska’s Bristol Bay Native Corporation; and John Krimmel, now an NEPC consultant.  

Of course, it won’t solve all the problems ailing the struggling retirement system. The fund’s Kentucky Employees Retirement System (KERS) Non-Hazardous Plan, which has a roughly 14% funded status, is the nation’s worst-funded state pension plan. 

But the state retirement system has also stabilized in recent years, particularly after the state government started meeting the full actuarially determined contribution. After reducing the KERS return target to 5.25%, down from 7.5%, the state government increased contributions to the KERS Non-Hazardous pension fund to about $1 billion, about a 70% increase from a roughly $600,000 sponsor contribution in prior years, according to Eager. 

In fiscal year 2019, those changes helped the KERS Non-Hazardous plan generate positive cash flow for the first time in 18 years, according to the comprehensive annual financial report (CAFR). It also helped nudge the state pension system’s funded status slightly upward. 

The pension fund is currently managed by the three-person investment team, which includes Joe Gilbert, who oversees public equity; Anthony Chiu, who manages private equity and alternative investments; and Steve Willer, who manages fixed-income investments.

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