Three Democratic senators, led by Sen. Elizabeth Warren, D-Mass., have asked the Securities and Exchange Commission to investigate whether Wells Fargo and senior officials violated laws by misleading investors and firing whistleblowers while the bank oversaw the creation of 2 million phony accounts.
The senators requested that the SEC investigate whether Wells violated three separate securities laws dealing with signing off on inaccurate financial reporting, failing to disclose investigations of the fake accounts, and firing employees who reportedly spoke up about the wrongdoing.
The three lawmakers' letter to SEC Chair Mary Jo White said Wells Fargo's CEO, John Stumpf, became aware of the fraud in 2013, yet he and the company's chief financial officer, John Shrewsberry, "submitted certifications relating to SEC filings after 2013 that did not indicate any knowledge of this massive fraud."
The letter was signed by Warren, Sen. Jeff Merkley, D-Ore., and Sen. Bob Menendez, D-N.J.
Wells also never disclosed to investors material facts regarding investigations into allegedly illegal sales practices until the bank signed a consent order with the Consumer Financial Protection Bureau on Sept. 8, according to the letter. The bank agreed to a $190 million settlement with the CFPB, the Los Angeles city attorney's office and the Office of the Comptroller of the Currency.
Stumpf personally touted Wells' success in cross-selling products and in opening new deposit and credit card accounts, the letter said. In addition, Stumpf said the firing of 5,300 employees for opening the phony accounts was not "material" to investors, the letter said.
"He did so apparently with knowledge that many of these retail accounts were created without customer authorization," the letter stated. "Mr. Stumpf and Wells Fargo investors clearly believed that the cross-sell ratio and the number of retail accounts were material to investment decisions – and yet Mr. Stumpf did not disclose that those numbers had been inflated by millions of fraudulent accounts."
The letter provided several examples in which the SEC had previously found securities fraud when an executive made misleading statements on earnings calls.
The senators also called for an investigation into whether Wells violated whistleblower protection laws when it fired employees who are said to have reported misconduct to an internal ethics hotline.
Media reports and lawsuits filed by former employees claim that Wells harassed and ultimately terminated employees for raising concerns about the creation of fake deposit and credit card accounts.
"These claims deserve the SEC's careful investigation," the letter stated.
Both Sarbanes-Oxley and the Dodd-Frank Act have anti-retaliation provisions to protect employee whistleblowers who report certain types of fraud and violations of securities law, the letter said.
Wells Fargo's actions are under review by the Department of Justice, state attorneys general offices and the Labor Department.