Wells Fargo's had a rough last few years, and it doesn't appear be getting any better.
Unfortunately for the bank, things just got a worse.
New York Attorney General Barbara Underwood announced Monday that the bank has been ordered to pay a $65 million penalty, following an investigation into the bank's controversial "cross-selling" tactics, in which the bank offered different financial products to its customers. The cross-selling craze eventually led to the bank opening millions of accounts in customers' names without their permission.
But the issue at the heart of this settlement is not that the bank opened up the fake accounts, but rather that the bank allegedly lied to investors about it.
"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," Underwood's office said in a statement.
According to Underwood's office the bank’s “cross-sell” business model, led employees to create millions of accounts without authorization from customers, costing New York investors 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,” 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.”
Although, Wells Fargo’s board of directors were made aware of sales misconduct as early as 2011, the bank still failed to disclose to investors that the success of its cross-sell efforts was built on fraud.
“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,” Underwood said.
Underwood's office noted that it is continuing to investigate Wells Fargo in connection with opening those millions of unauthorized accounts and enrolling consumers in services without their knowledge or consent. "Today’s settlement has no impact on that ongoing investigation and other pending investigations of Wells Fargo," Underwood's office said.
On Monday, Wells Fargo issued a statement, declaring it is pleased to reach the 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 bank said in a statement.
“We are making strong progress in our work to rebuild trust, and this represents another step forward," the bank continued. "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.”