Former Wells Fargo chief executive John Stumpf has agreed to pay $2.5m to settle Securities and Exchange Commission charges that he misled investors about the bank’s retail operations, which were at the centre of a fake accounts scandal.

The SEC also charged Carrie Tolstedt, who had been the long-serving head of Wells Fargo’s Community Bank, where for more than a decade unauthorised or fraudulent bank accounts were opened for customers who had not asked for them. Ms Tolstedt has not settled her case.

The cases are the latest fallout from a scandal that exploded in 2016 and led to the ouster of Mr Stumpf and other top executives. It has also cost Wells Fargo investors billions of dollars in fines and regulatory penalties and left it operating under an asset cap imposed by regulators.

Mr Stumpf earlier this year agreed to pay $17.5m as part of a settlement with the Office of the Comptroller of the Currency, which also banned him from any role at a US bank.

During his eight years as chief executive, he earned $166m from Wells Fargo, much of it in stock awards and options, but gave up or had clawed back about $69m as a result of the scandal.

The SEC said Mr Stumpf in 2015 and 2016 had signed and certified investor filings that “he should have known were misleading” with regards to Wells Fargo’s much-touted “cross-sell strategy”.

The strategy had been the linchpin of Wells Fargo’s apparent success and profitability, with its executives touting the bank’s ability to sell customers a variety of different products. The bank’s cross-sell numbers were inflated by millions of accounts that customers did not authorise.

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Mr Stumpf had certified the filings “after being put on notice that Wells Fargo was misleading the public about the cross-sell metric”, the SEC said.

The commission quoted internal discussions Mr Stumpf was involved in as early as 2013, when the Los Angeles Times began reporting about sales practices at Wells Fargo.

Ms Tolstedt had forwarded to Mr Stumpf an October 2013 Los Angeles Times article about the firing of 30 Wells Fargo employees for sales-related misconduct. “This is not a good article,” she said. “Not good,” he replied.

The case against Mr Stumpf said he should not have relied on Ms Tolstedt’s certifications about the Community Bank.

The commission alleged Ms Tolstedt had committed fraud in making certifications and public statements from 2014 to 2016 “when she knew or was reckless in not knowing” that the disclosures about the bank’s cross-sell numbers were materially false.

“If executives speak about a key performance metric to promote their business, they must do so fully and accurately,” said Stephanie Avakian, the SEC’s enforcement director.

“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,” she added.

Richard Strassberg, an attorney for Mr Stumpf, said: “At this time we will not be commenting on the settlement.” Mr Stumpf neither admitted nor denied the SEC’s allegations as part of the settlement.

An attorney for Ms Tolstedt, Enu Mainigi, said: “Ms Tolstedt was an honest and conscientious executive. 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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“Ms Tolstedt acted appropriately, transparently and in good faith at all times. We look forward to setting the record straight and clearing her name.”

Wells Fargo did not immediately respond to a request for comment. The bank paid $3bn earlier this year as part of a settlement for misleading investors about its sales practices with the SEC and the Department of Justice. It had previously paid more than $2bn to settle other sales practice-related cases with federal and state authorities, and class action claimants.

Via Financial Times