Misleading Customer and Operating Metrics: The Customers Behind the Count

Companies can give investors a false picture of demand, customer activity or growth through misleading customer and operating metrics that count business the underlying records do not support. A reservation can come from someone who never intended to buy. An account can stay in the headline after its customer has stopped using it, or never agreed to open it. If you know who actually ordered, consented, paid or used the product, you may know what the investor presentation left out.

This page follows the customer population, the counting rules and the operating records behind those claims. Our broader securities fraud evidence page follows the corporate records connecting a public statement to the transaction and the people who approved it.

What Does the Customer Metric Actually Measure?

A customer metric tells investors something about the business through the unit it counts: people, households, accounts, products or reservations. A customer can hold several products, while a reservation can come from an intermediary hoping to find a buyer. The activity, consent and reservation records explain what those relationships amount to.

The denominator is the population underneath a ratio. In a products-per-household measure, both the products included and the households counted affect the result. A growing total can reflect a new product added to the calculation, while a declining ratio can reflect new customers who initially hold fewer products.

Lordstown Motors illustrates the difference between a reservation and a buyer’s commitment. The Securities and Exchange Commission’s February 2024 settled order described a one-page reservation agreement that required no payment and imposed no obligation to buy an Endurance electric pickup truck. The Commission alleged that Lordstown nevertheless misrepresented the demand those reservations showed, including who had submitted them and whether they intended to buy trucks for their own fleets.

Lordstown’s Preorders Included People Who Did Not Plan to Buy

According to the Securities and Exchange Commission’s order, preorders mattered because Lordstown had no orders or sales to report to investors. The company also believed that fleet operators would feel more comfortable buying from a new manufacturer if other fleets were buying too. Its chief executive pressed the sales team to increase the total.

The alleged gap began with how a reservation entered the count. The Securities and Exchange Commission said Lordstown had no policies or procedures for evaluating preorder counterparties, and its sales team received no guidance on deciding whether a customer was a commercial fleet customer. It also lacked procedures for recording, tracking and maintaining preorder data. The sales pitch had a number before the business had a reliable way to qualify it.

The order recounted the company’s special committee analysis of the changing population. Intermediaries and influencers accounted for more than 40% of the reservations behind an earlier fleet-demand claim. By the final headline, they supplied most of the count:

The Securities and Exchange Commission described a reservation for 14,000 trucks from a counterparty with no apparent resources to buy that quantity, whose financial strength the chief executive had questioned. Another customer canceled a reservation for 5,000 trucks because of a misunderstanding. According to the order, the sales team continued counting that canceled reservation.

The final total also included a prospective arrangement to help generate sales leads. The Securities and Exchange Commission said the understanding had not been signed, and the counterparty had expressly told Lordstown it had no fleet and did not intend to buy trucks. In the Commission’s account, a promise to find customers had become customers already found.

Wells Fargo Counted Products Customers Never Used

Wells Fargo’s cross-sell metric purported to measure accounts and products per retail bank household. In its February 2020 settled order, the Securities and Exchange Commission alleged that the bank presented the ratio as evidence of a successful strategy built around meeting customers’ financial needs. Inside the Community Bank, the agency described a sales model driven by volume and management pressure to increase it.

The order connected that pressure to the bank records. Employees allegedly forged signatures to open unauthorized accounts, activated debit cards without consent and moved money from existing accounts to make new accounts appear funded. Other customers authorized products that employees knew they did not want, need or intend to use, including duplicate accounts. The metric included products opened without consent or through these sales practices until they closed for lack of use.

That distinction matters to someone who knows the account-opening process. The order described transfers matching the minimum amount needed to open a new account, followed by no further activity in that account. It also described employees using their own money to simulate funding. The alleged activity could come from the sales process itself, rather than from a customer choosing to use the product.

The Securities and Exchange Commission said certain executives reviewing or approving disclosures knew, or were reckless in not knowing, that the investor account was misleading or incomplete. The order described millions of unauthorized or fraudulent accounts. Wells Fargo agreed to a $500 million civil penalty, with the money designated for harmed investors. We see a customer relationship sold to investors before the customer had agreed to it.

The Unpublished Measure of Active Accounts

The Wells Fargo order gives an insider a direct comparison between the published metric and an internal attempt to measure actual use. In its annual reports, the bank described the cross-sell ratio as “products used by customers in retail banking households.”

According to the Commission, executives knew the calculation included products customers had not used. The bank later began developing an alternative measure, called active cross-sell internally. In doing that work, senior leadership recognized that as many as ten percent of accounts in the published metric had not been used within the previous 12 months. The Securities and Exchange Commission said the bank considered releasing the alternative but never did, partly because of concerns that it would prompt questions about earlier sales practices.

The definition had also changed beneath a growth claim. The Securities and Exchange Commission described the addition of existing global remittance accounts to the metric during 2013 without disclosure to investors. The remaining growth that year came from accounts and financial products inactive for at least 365 days. The annual report still celebrated record cross-sell.

An insider familiar with active accounts can explain which activity the company counted, when it occurred and who initiated it. The internal alternative, the public definition and the account histories offer different views of the same customer population. In the Commission’s account, the bank had developed a way to ask whether customers used the products. Investors kept getting the other number.

Operating Records Can Contradict the Delivery Promise

Lordstown’s alleged demand story also depended on when the trucks could reach customers. The Commission’s order described internal production and engineering updates showing delays while public statements promised deliveries by September 2021. Production and delivery were separate milestones: the Endurance needed testing and certification before it could be sold and delivered.

The parts records supplied another comparison. According to the Commission, management knew Lordstown lacked access to most of the critical General Motors parts it expected to use, while filings continued to describe that access as available. Supplier approvals and internal engineering schedules could therefore test the same business story as the preorder file. Our page on product capability and commercial readiness claims follows that part of the problem in more detail.

Which Records Explain the Customer Count?

The useful comparison follows a number from the customer record to the investor statement. The Lordstown and Wells Fargo orders show why the admission rule, the removal rule and the approvals matter together:

• What entered the count: reservation agreements, account-opening documents, customer identities and the definition of the population being counted.
• What the customer did: consent, funding, use, cancellation and correspondence explaining whether a counterparty intended or could afford to buy.
• What stayed in the count: canceled reservations, unused products and the rules for removing them or adding a new product category.
• What management knew: internal metric versions, sales-quality reports, complaints, engineering updates and the public statement approved afterward.

Finance staff may know how a report was assembled, sales staff may know what a customer agreed to, and operations staff may know what could actually be delivered. The Securities and Exchange Commission’s Lordstown order also described an accounting firm that helped prepare financial statements and performed bookkeeping, then audited its own work. We connect the particular statement to its underlying business records and the people who prepared and reviewed it.

Statistical screening is one part of fraud detection. Accounting Fraud: A Literature Review, published in Risk Governance and Control: Financial Markets & Institutions in 2019, discusses employee reporting alongside analytical tests and other investigative methods. In the customer counts here, the comparison is the customer’s agreement and activity against what management said the count meant. That is where an insider can explain something the total leaves hidden.

We assess a securities fraud report around the metric you know and the investor statement it supported. Eligible SEC whistleblowers can share 10% to 30% of qualifying monetary sanctions collected. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. These customer-metric matters concern the separate SEC whistleblower program, which we handle with you.

You Know Who Was Really Counted

If your account, sales or operating records tell a different story from the investor presentation, speak with our whistleblower experts about the customers behind the count. We work beside you throughout the case, connecting your knowledge of how the number was built to the public claim and bringing in securities fraud whistleblower lawyers who understand disclosure and customer metrics.