Wells Fargo says SEC prob­ing its sales prac­tices

Daily Local News (West Chester, PA) - - BUSINESS - By Ken Sweet AP Busi­ness Writer

Wells Fargo has con­firmed that the Se­cu­ri­ties and Ex­change Com­mis­sion is in­ves­ti­gat­ing its sales prac­tices, and revealed that it has al­most dou­bled to $1.7 bil­lion the amount set aside to deal with its le­gal prob­lems.

The bank said in a reg­u­la­tory fil­ing Thurs­day that a myr­iad of lo­cal, state and fed­eral gov­ern­ment agen­cies are in­ves­ti­gat­ing Wells for its sales prac­tices scan­dal. That’s on top of class-action law­suits filed against the bank by in­vestors, its for­mer em­ploy­ees and cus­tomers.

Due to its mount­ing le­gal woes, Wells Fargo is also boost­ing the amount of money it has set aside for le­gal ex­penses from the $1 bil­lion it had set aside as of June 30.

The San Fran­cisco-based bank has been under fire since it was

dis­cov­ered that in or­der to meet ex­tremely lofty sales goals, em­ploy­ees opened as many as 2 mil­lion bank and credit card ac­counts with­out cus­tomer au­tho­riza­tion. The com­pany had also fired more than 5,000 em­ploy­ees, the vast ma­jor­ity of them lower-level work­ers.

The big­gest scan­dal in the bank’s 164-year his­tory

forced the abrupt re­tire­ment last month of its CEO, John Stumpf, af­ter the board re­claimed $41 mil­lion in com­pen­sa­tion. The com­pany named as its new CEO Tim Sloan, who has made fix­ing the bank’s rep­u­ta­tion his top pri­or­ity.

Sloan held an “all-hands” meet­ing with em­ploy­ees last month where he apol­o­gized di­rectly to the bank’s front­line work­ers. Wells has also launched an ad­ver­tis­ing cam­paign to apol­o­gize to cus­tomers. The bank is also

fight­ing off an­gry politi­cians, both Repub­li­can and Demo­crat, who in a tense elec­tion year have make an ex­am­ple of Wells Fargo.

“I know there is a lot we need to get right and team mem­bers through­out the com­pany are fo­cused on do­ing the hard work that is nec­es­sary to re­store trust in Wells Fargo,” Sloan said in pre­pared re­marks at an investor con­fer­ence in Bos­ton on Thurs­day.

Sloan said Wells will also now pro­vide up­dates on the

ac­tiv­ity in­side its branches on a monthly ba­sis. When Wells re­ported its thirdquar­ter re­sults last month, there were some early signs that cus­tomers were pulling back their busi­ness with the bank. Wells re­ported dou­ble-digit per­cent­age drops in bank ac­count open­ings, as well as de­clines in bank branch traf­fic. Wells em­ploy­ees have said, since the scan­dal, that they are some­times spend­ing their en­tire work days clos­ing cus­tomer ac­counts.

While ac­knowl­edg­ing the de­cline in branch traf­fic, Mary Mack, the new head of con­sumer bank­ing at Wells, told in­vestors Thurs­day that “It is still too early to gauge the longer term im­pact on these busi­ness trends.”

But the bank’s le­gal woes clearly are nowhere close to be­ing over. Along with the dis­clo­sure about the le­gal is­sues re­gard­ing its sales prac­tices, Wells also dis­closed it is in talks with state and fed­eral reg­u­la­tors over its prac­tices tied to the hous­ing bub­ble and sub­se­quent fi­nan­cial cri­sis. Known as the Work­ing Group of the Fi­nan­cial Fraud En­force­ment Task Force, it is the group of reg­u­la­tors that have been reach­ing multi­bil­lion set­tle­ments with ma­jor fi­nan­cial com­pa­nies like Bank of Amer­ica, JPMor­gan Chase and Gold­man Sachs.

Wells Fargo shares rose 19 cents, or 0.4 per­cent, to $45.43 in mid­day trad­ing Thurs­day.

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