Wells Fargo Securities Enforcement Case: The Cross-Sell Number That Counted Products Customers Never Used

In the Wells Fargo securities enforcement case announced in 2020, Wells Fargo & Company agreed to pay a $500 million civil penalty to settle Securities and Exchange Commission charges that it misled investors about its cross-selling success. The bank presented its products-per-household count as evidence that it was meeting customers’ financial needs. The Commission found that the count included unauthorized accounts and products customers never used. If you know how an account was opened, funded or counted, you may know where that investor story came apart.

This page follows the SEC’s cross-sell disclosure action and the internal decisions behind the published number. Our page on misleading customer and operating metrics covers the broader problem of turning customer records into claims about demand and growth.

What Did Wells Fargo Tell Investors About Cross-Selling?

Wells Fargo told investors that cross-selling meant offering existing customers additional financial products they wanted, needed and would use. Its Community Bank was the company’s largest business unit, contributing more than half of revenue from 2007 through 2016. It managed everyday products such as checking and savings accounts, debit cards and bill pay for individuals and small businesses.

The Commission’s order recounted how Wells Fargo promoted cross-selling as a source of competitive advantage, revenue and earnings growth. The company’s 2012 Vision and Values statement put the customer first:

The cross-sell metric gave that promise a number: accounts and products per retail bank household. Wells Fargo published it in annual reports and SEC filings and cited its growth in investor presentations and analyst conferences. According to the order, cross-sell growth also affected certain executives’ compensation.

How Did Wells Fargo Produce the Sales Behind the Metric?

The Commission found that the Community Bank ran a volume-based sales model that pressured employees to sell products with little regard for customer need or expected use. Product sales helped determine performance evaluations from tellers and bankers through regional executives. By approximately 2010, parts of the business regarded the plans as too high to meet by selling products customers actually wanted. The order said employees’ manipulation of sales was known within Wells Fargo as “gaming.”

The order described employees forging signatures to open unauthorized accounts and activating debit cards without consent. In a practice called simulated funding, employees moved money from existing customer accounts into newly opened accounts to satisfy the minimum funding requirement for sales credit. The order described transfers matching that minimum, followed by no further activity in the new account. Employees also sometimes supplied their own money to make an unauthorized account appear funded.

The order described a bill-pay version of the same practice. Employees opened unauthorized bill-pay products or encouraged customers to make token payments because sales credit required a payment. Some employees changed customer phone numbers, email addresses or mailing addresses to keep customers from discovering unauthorized accounts, including through satisfaction surveys. The same records that made a sale count could help keep the customer from hearing about it.

Consent alone did not explain the quality of the business being counted. The Commission also found that employees persuaded customers to authorize duplicate or unnecessary products while knowing those customers did not want, need or intend to use them. Unused debit cards and bill-pay products could remain open for up to four years before closure removed them from the metric. A product could keep contributing to the investor story long after the supposed customer relationship had gone nowhere.

What Did the Wells Fargo Cross-Sell Metric Leave Out?

The Commission found that the Wells Fargo cross-sell metric counted products without consistently showing whether customers used them. In its 2014 and 2015 annual reports and a January 12, 2015 response to an SEC comment letter, the company described the ratio as “products used by customers in retail banking households.” The Commission found that executives knew many included products were unused and that the added word “used” made the description misleading.

The counting rules also changed beneath a growth claim. The order found that Wells Fargo added existing global remittance accounts during 2013 without telling investors, excluding inactive remittance accounts in a way inconsistent with prior practice. The metric rose by .11 that year, with .04 of the increase coming from the newly included product. The remaining growth came from accounts and financial products inactive for at least 365 days. The annual filing celebrated record cross-sell.

According to the order, leadership began developing an alternative called active cross-sell to capture products that had actually been used. In doing that work, it recognized that as many as ten percent of accounts in the published metric had not been used within the previous 12 months. According to the Commission, the bank considered publishing the alternative but did not, partly because it could prompt questions about historical sales practices. The bank built a measure of real use. Then it kept the measure to itself.

What Did Wells Fargo Know About Sales Pressure?

The Commission found that Community Bank leadership learned about sales misconduct through internal investigations, sales-quality oversight, regional managers, employees and customers. The warnings connected the conduct to sales goals and management pressure. In a 2004 email quoted in the order, an internal investigations manager wrote “I just want” before explaining the wish to keep Community Bank senior leadership aware of the growing sales-practices problem.

The order described regional executives objecting to the targets and the low-value accounts they encouraged. A senior staff member proposed eliminating incentive payments for accounts that never funded, unused debit cards and multiple demand deposit accounts opened for the same customer in a day. The Commission found that senior leadership remained unwilling to fundamentally change the sales model. For an employee who saw those proposals, the response to the warning is part of the evidence.

Leadership increased sales plans nearly every year through 2013, according to the order. When setting new goals, leadership rarely accounted for the fact that earlier sales already included accounts produced through misconduct. Inflated sales became the starting point for the next demand for growth.

The Commission also found that certain Community Bank leaders minimized sales pressure and the scale of the problem during Office of the Comptroller of the Currency examinations. Assurances to company management and the board encouraged the view that individual misconduct was the root problem. The order said leadership treated poor sales quality as a cost of doing business. We would call forged signatures more than a cost of doing business.

Why Did Wells Fargo’s Customer Accounts Become a Securities Fraud Case?

The customer accounts became a securities fraud issue because Wells Fargo used the cross-sell metric to persuade investors that its central business strategy was succeeding. The Commission found that, from 2012 through 2016, Wells Fargo failed to disclose both the widespread sales misconduct and the significant numbers of unused or unauthorized accounts in the metric. The Commission also found that certain executives who reviewed or approved those disclosures knew they were misleading or incomplete, or recklessly failed to recognize it.

The Commission found that executives also gave misleading explanations when cross-sell growth slowed. At the May 2014 Investor Day, an executive offered positive or innocuous explanations while leaving out the effect of declining sales growth and efforts to curb misconduct. At the May 2016 Investor Day, an executive again left out declining product sales, improving sales quality and the removal of low-quality accounts.

For someone preparing investor materials, the connection is specific: what the sales-quality work showed, what the metric team understood and what management approved for publication. The Commission’s order found that Wells Fargo broke the securities fraud laws.

The Wells Fargo Civil Penalty Was Designated for Investors

The $500 million civil penalty was designated for harmed investors through a Fair Fund. The order described three significant stock drops following the sales-practices settlements and resulting public criticism, translating into an approximately $7.8 billion decrease in market capitalization. Wells Fargo also had to pay the costs of administering that distribution.

What Evidence Is Needed for Whistleblowing?

For a cross-sell disclosure matter, useful evidence connects customer consent and actual account use to the number published for investors and the decisions behind it. Account-opening records and funding transfers show how a product entered the system. Activity histories and closure rules show why it stayed in the count. We connect those customer records, internal metric versions and disclosure reviews to the claim investors read.

The corporate reporting process runs from operating records through preparation and review of the company’s disclosures. In Wells Fargo’s case, an account-opening employee could understand the customer’s consent, a sales-quality employee could understand repeated complaints, and a finance or disclosure employee could understand the definition investors received. Our work on securities fraud evidence brings those parts together around the statement they can test.

That value of information from inside the business has support beyond this case. The Significance of Whistleblowing as an Anti-Fraud Measure, published in the Journal of Forensic & Investigative Accounting in 2018, examined occupational-fraud survey data from the Association of Certified Fraud Examiners. Among 4,943 frauds with complete data, the study found that whistleblowers detected 35.9%, compared with 21.4% detected through internal controls. Its analysis also found that fraud involving more participants was more likely to be detected through whistleblowing, after controlling for other factors.

Wells Fargo’s order describes information reaching leadership from several parts of the business. A person who understands how the public count differs from actual account activity can explain something the headline number conceals. We work with that person to connect the discrepancy, the warnings and the disclosure decision.

Whistleblower Awards and the Cross-Sell Evidence

Eligible SEC whistleblowers can receive 10% to 30% of qualifying monetary sanctions collected when the covered SEC action exceeds $1 million in sanctions. We assess how your knowledge of customer accounts, sales goals or disclosure decisions could contribute to a securities fraud enforcement action.

If the conduct you know also involves false claims against the government, we assess that separate issue with you. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know What the Account Count Concealed

If you saw sales credit awarded for unused products or an internal measure kept out of investor materials, talk with our whistleblower experts about the account behind the number. We build the case with you around the customer activity, internal warnings and disclosure decisions, and bring in securities fraud whistleblower lawyers who understand operating metrics. We remain your partners as the evidence develops and the case moves forward.