SEC v. Carrie L. Tolstedt, No. 3:20-cv-07987, Northern District of California (May 30, 2023) — Complaint

COMPLAINT

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MONIQUE C. WINKLER (Cal. Bar No. 213031)
  [email protected]
SUSAN F. LAMARCA (Cal. Bar No. 215231)
  [email protected]
MARC D. KATZ (Cal. Bar No. 189534)
  [email protected]
REBECCA LUBENS (Cal. Bar No. 240683)
  [email protected]
ERIN E. WILK (Cal. Bar No. 310214)
  [email protected]

Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
44 Montgomery Street, Suite 2800
San Francisco, CA 94104
(415) 705-2500 (Telephone)
(415) 705-2501 (Facsimile)
SECURITIES AND EXCHANGE COMMISSION,

  Plaintiff,

 vs.

CARRIE L. TOLSTEDT,

  Defendant.

Case No.

COMPLAINT

Plaintiff Securities and Exchange Commission (the “SEC”) alleges:
SUMMARY OF THE ACTION
1. For several years, Wells Fargo & Company (“Wells Fargo” or the “Company”)
publicly claimed that its business strategy was to sell to existing retail banking customers products
that they needed, wanted, and used, and that it was able to measure its success through its
published “cross-sell metric” featured in its Annual Reports and public filings.  Wells Fargo
publicly touted its cross-sell metric as a key business indicator that captured the products it had
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION

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sold to customers that they needed, wanted, and used.  According to Wells Fargo, the cross-sell
metric was supposed to represent the average number of products sold to households that had “the
potential for revenue generation and long-term viability.”
2. Defendant Carrie L. Tolstedt, who served as the Senior Executive Vice President of
Community Banking for Wells Fargo, publicly discussed the cross-sell strategy, and the reported
metric, as an important means for investors to distinguish Wells Fargo from its banking
competitors.
3. Contrary to these public statements, Tolstedt and Wells Fargo’s Community
Bank—its largest operating segment—implemented a volume-based sales model in which
employees sold volumes of products to existing customers, often with little regard to actual
customer need or expected use.  For several years, until mid-2016, Wells Fargo opened millions of
accounts or sold products that were unauthorized or fraudulent, and others that were unneeded and
unwanted by retail banking customers.  The unused accounts and products were included in the
Community Bank’s cross-sell metric, sometimes for years.
4. Defendant Tolstedt misled investors and the public as to the value of Wells Fargo’s
securities through false and misleading statements and by repeatedly providing misleading sub-
certifications as to the accuracy of the Company’s required quarterly and annual reports to
shareholders.  These sub-certifications resulted in misleading statements being disseminated to
investors in the Company’s quarterly and annual reports.  Consistent with Wells Fargo’s materially
misleading public statements in its annual and quarterly reports, Tolstedt publicly described the
cross-sell metric as a means of measuring Wells Fargo’s relationships with its customers.  Yet, as
Tolstedt knew or was reckless in not knowing, the cross-sell metric appeared to be growing for
years as it captured growth in products that resulted from rampant sales misconduct rather than
measuring products that customers wanted, needed, and used.
5. In late 2013, some of Wells Fargo’s aggressive and fraudulent sales practices began
to surface through media reports, causing growth of the cross-sell metric to stall.  By May 2015,
Wells Fargo faced the first of a series of government actions when the City of Los Angeles sued
the Company based on certain sales practices in the Los Angeles area.  Yet Tolstedt continued,

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through mid-2016, to publicly endorse the cross-sell metric to investors, while internally studying
ways to eliminate the substantial number of idle or unused accounts that had kept the cross-sell
metric from growing since early 2014.
6. Rather than reveal to investors the extent to which the inclusion of unused,
unneeded, and unauthorized accounts in the cross-sell metric had inflated the reported number,
Tolstedt continued to falsely claim that Wells Fargo’s cross-sell strategy was to sell products that
customers valued and used.  At the same time, Tolstedt also sold shares in Wells Fargo, which she
owned either directly or indirectly, and profited.  For instance, in November 2014, Tolstedt sold
shares of Wells Fargo stock for more than $11.8 million.
7. In September 2016, Wells Fargo announced settlements with two federal agencies,
the Consumer Financial Protection Bureau (“CFPB”) and the Office of the Comptroller of the
Currency (“OCC”), and a settlement with the City of Los Angeles, of actions taken by the three
governmental entities to address sales misconduct.  Shortly thereafter, the market price of Wells
Fargo’s securities declined materially, reducing the Company’s market capitalization by billions of
dollars as the market learned of the extensive misconduct.  Tolstedt departed from Wells Fargo that
month.
8. The SEC seeks an order from the Court enjoining Tolstedt from future violations of
the securities laws; prohibiting Tolstedt from acting as an officer or director of any public
company; requiring Tolstedt to pay a civil monetary penalty, and disgorgement of ill-gotten gains
or unjust enrichment with prejudgment interest thereon; and providing for other appropriate relief.
JURISDICTION AND VENUE
9. The SEC brings this action pursuant to Sections 20(b) and 20(d) of the Securities
Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b) and 77t(d)] and Sections 21(d) and 21(e) of the
Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d) and 78u(e)].
10. This Court has jurisdiction over this action pursuant to Section 22(a) of the
Securities Act, [15 U.S.C. § 77v(a)], and Section  27 of the Exchange Act [15 U.S.C. § 78aa].
11. Defendant, directly or indirectly, made use of the means and instrumentalities of
interstate commerce or of the mails in connection with the acts, transactions, practices, and courses

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of business alleged in this complaint.
12. Venue is proper in this District pursuant to Section 22(a) of the Securities Act,
[15 U.S.C. § 77v(a)], and Section 27(a) of the Exchange Act [15 U.S.C. § 78aa(a)].  Acts,
transactions, practices, and courses of business that form the basis for the violations alleged in this
complaint occurred in the Northern District of California.
13. Under Civil Local Rule 3-2(d), this civil action should be assigned to the San
Francisco Division because a substantial part of the events or omissions which give rise to the
claims alleged herein occurred in San Francisco County and defendant maintains a residence in
San Francisco.
DEFENDANT
14. Carrie L. Tolstedt, age 60, resides in San Francisco, California and Scottsdale,
Arizona.  Tolstedt was an Executive Officer of Wells Fargo, and served as Senior Executive Vice
President of Community Banking at Wells Fargo from June 2007 until July 2016, shortly before
she left the bank.  Tolstedt was compensated in the form of salary, equity awards, and other
incentive compensation, among other things.
15. During the investigation conducted by the staff of the SEC preceding this action,
Tolstedt asserted her Fifth Amendment privilege in response to questions regarding the same
subjects that comprise the allegations in this complaint.  Also during the investigation, Tolstedt
entered into agreements by which she agreed that the running of any statute of limitations
applicable to any action or proceeding against Tolstedt by the SEC, including any sanctions or
relief that might be imposed, is tolled and suspended for the period beginning on May 20, 2019
through December 9, 2020.
RELEVANT ENTITY
16. Wells Fargo & Company is a Delaware corporation based in San Francisco,
California.  Wells Fargo’s common stock is registered under Section 12(b) of the Exchange Act,
and its securities are quoted on the New York Stock Exchange under the ticker “WFC.”

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FACTUAL ALLEGATIONS
A. Wells Fargo Touts Its Business Strategy of Cross Selling, and the Key “Cross-
Sell” Metric the Community Bank Used to Measure Its Success
17. As a public company, Wells Fargo filed with the SEC annual and quarterly reports
that are publicly-accessible, and made and filed other frequent public announcements.  Among the
required information, the Company reported annually and quarterly to its shareholders
management’s analysis of how the Company and its operating segments, such as the Community
Bank headed by Tolstedt, had executed on business strategies.
18. In its quarterly and annual reports, during 2014, 2015, and 2016, Wells Fargo’s
management described, as a core business strategy, that it sought to increase sales of products and
accounts to its customers through what the Company termed a “cross-sell” strategy.  In particular,
Wells Fargo characterized the core business strategy in its Community Bank as “needs-based”
cross-sell.  In its 2014 Annual Report, the Company described the strategy as “increas[ing] the
number of products our customers use by offering them all of the financial products that satisfy
their financial needs.” (Emphasis supplied.)
19. To further explain to shareholders, and to the public, its  “needs-based” cross-sell
strategy, in these required reports Wells Fargo referred to and incorporated its Vision & Values
statement, which was prominently displayed on its website.  Wells Fargo’s Vision & Values
statement in 2015 proclaimed:  “Our vision has nothing to do with transactions, pushing products,
or getting bigger for the sake of bigness... We do not offer products that are inappropriate for our
customers’ needs and circumstances.”  Reinforcing this statement, in its 2015 Annual Report,
Wells Fargo stated:  “Our approach to cross-sell is needs-based as some customers will benefit
from more products, and some may need fewer.”
20. The Company pitched the cross-sell strategy to investors as a foundation of its
revenue model.  Wells Fargo further informed investors that it used a performance metric to
calculate the number of products per household that Community Bank customers used, which it
called the “cross-sell metric.”  Wells Fargo claimed the cross-sell metric that purportedly measured
the cross-sell strategy’s success was a leading indicator of revenue and earnings and a centerpiece

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of its growth strategy for the Community Bank.
21. For example, in its 2014 Annual Report to shareholders, Wells Fargo described its
cross-sell strategy as “key to our ability to grow revenue and earnings especially during the current
environment of slow economic growth and regulatory reform initiatives.”  Indeed, in each of its
required quarterly and annual reports filed with the SEC from 2014 through the second quarter of
2016, Wells Fargo reported the cross-sell metric for the Community Bank.  In addition, Wells
Fargo typically explained how the cross-sell metric compared to prior quarters or annual periods.
B. Sales Incentives Linked to the Cross-Sell Strategy Spur Banker Fraud that
Falsely Inflated the Reported Metric
22. The Community Bank, which Tolstedt led from 2007 through mid-2016, was the
largest of Wells Fargo’s three business units,  contributing more than half (and in some years more
than three-quarters) of the Company’s revenue.  For the majority of this period, including from
2013 through 2015, Tolstedt reported directly to the Chief Executive Officer.  In late 2015,
Tolstedt began to report to the President, who in turn reported to the CEO.
23.  The Community Bank was responsible for the everyday banking products sold to
individuals and small businesses, including checking and savings accounts, certificates of deposit
(“CDs”), debit cards, as well as more complex products.  The Community Bank was also
responsible for managing the large network of bank branches, referred to within Wells Fargo as
“stores,” as well as other sales channels through which Wells Fargo offered its products.
24. The branches employed, among others, bankers who were generally responsible for
offering accounts and financial products or services to customers.  The bankers reported up
through managers of the branches to Regional Bank Executives, who reported to Tolstedt.  In
addition, the persons who managed the various groups organized around products that the
Community Bank offered also reported up to Tolstedt.
25. The Community Bank also had financial and risk officers who reported to Tolstedt
and assessed the Community Bank’s business progress and its risks.  Those persons provided
information to the financial and risk officers for the Company overall, often after first discussing
the information with Tolstedt.  In addition, at least quarterly, Tolstedt met with the CEO, and

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frequently others, to discuss the business of the Community Bank and to make strategic plans.  In
these meetings, Tolstedt discussed the cross-sell strategy, and reasons for upward and downward
trends in the cross-sell metric.
26. Through 2013, the Community Bank, led by Tolstedt, implemented a volume-
based sales model, which included sales and compensation plans that pressured bankers to sell
products to existing customers, often without regard for any actual customer need or use.  Regional
Bank Executives, managers, and front line bankers repeatedly raised objections to sales plans that
left bankers little option but to sell unneeded products to customers.  Complaints about the sales
goals were regularly escalated to Tolstedt.  The complaints specifically articulated that the sales
goals were too high and that the goals, along with management pressure, incentivized employees
to sell low-quality or valueless, duplicate products, sometimes through misconduct.
27. For instance, in a June 2014 resignation email to Tolstedt and others, the resigning
banker complained about multiple checking accounts being opened for individual customers and
business package accounts that were not suitable to the customers’ needs, explaining:  “When
tellers and bankers are stating repeatedly that they are only doing what their managers are
instructing them to do, there should be a closer look at the practices of retail managers, district
managers and area presidents.  There are numbers that need to be met but meeting those numbers
at the expense of our customers, profitability and our shareholders is not good business. ...  There
are rampant practices to manipulate numbers.  . . .  I have spent a majority of my time here at Wells
Fargo closing accounts for customers.  Reviewing profiles with more than 4 or 5 checking
accounts which are opened and closed within months.  Businesses with package accounts that are
not suitable to their needs.”
28. Indeed, thousands of Wells Fargo employees engaged in unlawful conduct to sell
products of no or low value to customers.  Between 2011 and 2016, tens of thousands of
employees were the subject of allegations of unethical sales practices, and more than 5,300
employees were terminated for customer-facing sales ethics violations, including falsifying bank
records; more than 23,000 employees were referred for sales practices investigations and
thousands received disciplinary action short of termination or resigned prior to the conclusion of

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the Company’s investigations into their sales practices.
29. Many of the unethical or illegal sales practices were referred to as “gaming” within
Wells Fargo.  Those gaming practices included, among others:  e  mployees’ creation of false
records and forgery of customers’ signatures to open accounts that were not authorized by
customers; employees’ alterations of customer phone numbers, email addresses, or physical
addresses on account opening documents, either to prevent customers from finding out about
unauthorized accounts, or to prevent customers from being contacted in customer satisfaction
surveys; employees’ transferring funds from existing accounts of customers, without their consent,
to a newly-opened but unauthorized account, in order to meet the funding criteria required to
receive credit for “selling” the new account.
30. When the Community Bank set employee annual sales goals at a level to achieve
year-over-year sales growth, the base level of sales from the prior year included accounts or
financial products resulting from unlawful misconduct or gaming.  This had the effect of imposing
additional pressure on employees to continue gaming practices.
31. During weekly meetings with Tolstedt, and in meetings with her deputies who
described the discussions to Tolstedt, Regional Banking Executives pointed to the sales goals and
incentive plans put in place by Tolstedt as leading to low-quality sales of products that went
unused by customers.  However, Tolstedt deflected criticism of the sales model and incentive
system, and was unwilling to change how sales were measured, fearful that such changes would
adversely impact the cross-sell metric.
32. As Wells Fargo discovered misconduct by front line bankers through 2013, the
Company frequently fired the bankers but rarely made changes designed to address the sales goals,
incentive plans, and managerial pressure that caused the misconduct.  In 2013, the Community
Bank under Tolstedt’s leadership fired more than a thousand employees for sales misconduct, as it
had during the prior year.
C. Tolstedt Manages the Community Bank’s Reported Cross-Sell Metric
33. Tolstedt was in charge of, and closely involved in, the decision-making for the
Community Bank’s calculation of its cross-sell metric.

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34. Accounts and financial products opened without customer consent or pursuant to
gaming practices were included in the Community Bank cross-sell metric until the point when
such accounts were eventually closed—for some products, months or years later—for lack of use.
Similarly, accounts and financial products that were never or seldom used by customers were
also included by the Company in the Community Bank cross-sell metric until such accounts
were eventually closed for lack of use, at which time those accounts were removed from the
cross-sell metric.
35. Indeed, unauthorized and other unused accounts were frequently counted in the
cross-sell metric for months or years before they were removed.  In some cases (like checking
or savings accounts), the unused accounts were closed relatively quickly (usually within 90
days if unfunded).  But for other products such as debit cards, which was the largest product
category included in the cross-sell metric, the unused accounts remained open without activity
for up to four years.
36. Tolstedt exercised approval over decisions regarding potential changes that would
impact the cross-sell metric, such as decisions regarding when to “purge” or remove groups of
products from the metric.  For instance, with Tolstedt’s knowledge and approval, purges of unused
accounts were at times delayed in order to minimize the impact on the reported cross-sell metric,
including by pairing the purges with other events that caused an increase in cross-sell.
37. Thus, in late 2013, Tolstedt acknowledged to senior management at Wells Fargo
that measuring and managing cross-sell appropriately would require ensuring that low-quality sales
of products that customers did not use or value were either automatically purged out of the metric,
or “never get into the count.”  She explained that such controls were important to ensure that the
cross-sell metric remained meaningful to shareholders.  But, as Tolstedt was aware, the
Community Bank did not regularly purge low-quality products from the metric or otherwise
prevent significant amounts of those products from being included in the count.

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D. Media Reports of Sales Misconduct Lead to Scrutiny and Lower Sales
38. In October 2013, the Los Angeles Times reported that Wells Fargo had fired
approximately 30 employees in the Los Angeles area for sales-related misconduct.  In forwarding
the article to the CEO, Tolstedt alerted him:  “This is not a good article.”
39. The Los Angeles Times continued its reporting in a December 2013 article that
stated that its sources included “28 former and seven current Wells Fargo employees who worked
at bank branches in nine states, including California,” and internal bank documents.  The Times
detailed practices such as bankers ordering credit cards without customers’ permission, forging
client signatures, and begging their own family members to open “ghost accounts.”
40. Shortly after the first article was published, Tolstedt participated in a meeting with
senior officers of Wells Fargo and other leadership of the Community Bank in which they
discussed the estimated number of employees who were fired by the Community Bank for sales
misconduct, which was approximately 1,000 or more annually or roughly one percent of the
number of bankers.  As Tolstedt was aware, the number of employees dismissed annually did not
account for the far larger number of persons who were investigated for such practices but not fired,
either because they resigned while under investigation or were disciplined less harshly.
41. The Los Angeles Times reporting affected the Community Bank, as it saw a
significant decrease in sales immediately after the December 2013 article.  Employees of the
Community Bank closely watched sales data over the ensuing quarter, in order to report to the
information to Tolstedt.
E. Tolstedt Affirms Misleading Cross-Sell Claims in Public Statements
Tolstedt Misleadingly Describes Cross-Sell at 2014 Investor Day Conference
42. During the first quarter of 2014, Tolstedt learned that growth in the cross-sell
metric had “flattened” due to a decrease in sales of new products, which was itself due in large part
to the chilling effect of the revelations by the Los Angeles Times.
43. The decline in sales was linked to the attention within Wells Fargo to the media
reports, which led to pressure from the board of directors, the Corporate Risk Officer, and from the
bank’s primary regulator (the OCC) to curb bad behavior resulting from aggressive sales goals.  By

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the beginning of May 2014, Tolstedt was made aware of data that showed that the cross-sell metric
appeared to be declining.
44. Tolstedt discussed this phenomenon repeatedly with her top deputies during the
first quarter of 2014.  For instance, Tolstedt learned from her staff that the number of sales had
decreased, but that a measurable portion of the decline was due to improvements in sales quality;
in other words, fewer accounts showed signs of so-called low quality—lack of authorization or
use.  Her staff recommended that the sales plan reflect these lower numbers to comport with this
new reality.
45. Further, Tolstedt and her staff discussed during the first few months of 2014 the
fact that the slowdown in growth in the cross-sell metric presented a challenge in communicating
the cross-sell strategy to investors.  Tolstedt asked her team to estimate what percentage of reduced
sales were “empty” or not used by the customer, so that they could understand the effect on the
cross-sell metric.
46. By May 2014, Tolstedt was completing preparations for the important “Investor
Day” Conference that Wells Fargo hosted every other year.  The 2014 Conference was scheduled
to occur over several hours on May 20, 2014, in San Francisco, and was expected to be attended by
numerous large investors, as well as by securities industry analysts who followed Wells Fargo’s
stock closely and who wrote about Wells Fargo in their communications with their own investor
clients.  The highest levels of management at Wells Fargo—including the CEO, the Chief
Financial Officer, the Chief Operating Officer, and Tolstedt as head of Community Banking—
were slated to provide details for the attendees regarding the Company’s achievements over the
prior two years and its strategies going forward.
47. In preparing for the 2014 Investor Day Conference, in May 2014, Tolstedt provided
senior officers at Wells Fargo with the slide presentation she intended to use to present on behalf of
the Community Bank during the Investor Day Conference.  The slides reiterated that cross-selling
to customers remained a core business strategy, and emphasized that the purpose of cross-selling
was to satisfy customers’ “needs.”  The slides also touted “growth” in the cross-sell metric, using
data over a two-year period.

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48. In contrast to the emphasis on customer “needs” in the slides, and the claims to
recent growth in the cross-sell metric, Tolstedt revealed to Wells Fargo senior officers that she had
concluded that a very different phenomenon was influencing the cross-sell metric.  According to
Tolstedt, she was managing how her team talked about cross-sell, because she saw that “our cross-
sell will flatten” and that it “could decrease some.”  Further, in forwarding the slides to others in
management, Tolstedt described that the flattening and likely decrease in the metric was due to the
fact that sales levels were down due to changes the bank made to address poor sales quality,
alluding to the firings in Southern California.  Tolstedt also described the fact that the metric
included products that were not used, or for which usage and profits were “low,” but she assured
the management team that those products were “rolling off” the metric.  Tolstedt reiterated that the
Community Bank’s “cross-sell could weaken some” and estimated that it would take a year to
eighteen months to “get through” the trend.
49. Finally, as Tolstedt acknowledged in her internal communications within Wells
Fargo, the slide presentation did not capture the known causes for the weakening and likely decline
in the cross-sell metric.
50. A few days prior to the Investor Day Conference, Tolstedt informed her staff that
she expected a question about the cross-sell metric and why “the pace of growth appears to be
slipping” from an analyst who followed Wells Fargo’s stock.  At the May 20, 2014 Investor Day
Conference, the analyst did ask Tolstedt, as expected, to explain the apparent slowdown in growth
of the cross-sell metric, including the observation that “[i]t looks like the pace of cross-sell from
2012 to 2013 from 6.1 products to 6.2 products, that’s the slowest percentage increase on a core
basis in a couple decades.”
51. In response, Tolstedt stated:

When you think about cross-sell, there’s many things that influence our
cross-sell rate over time. Over different cycles we have seen the pace of
growth change, and that is really to be expected. Let me give you a couple
of examples that can impact your cross-sell.

CDs. In times where our customers choose that they would rather have their
money in a savings account at Wells Fargo, they will close the CD. That
will impact our cross-sell rate. Home equity loans. There’s times at which
they will refinance their first, fold in their home equity loan, and that will

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impact our cross-sell. All really good for Wells Fargo and will change over
time.

Another impact of cross-sell over time can easily be, if our household
growth is faster, we will bring in a new household at three or four products
where our existing base as it sits. None of this is unexpected; none of this is
bad news. In fact, we are very excited about our cross-sell.

When you think about the seventh and eighth product being twice as more
profitable than the first four and the fact that our cross-sell rate will grow a
little bit slower than certainly our profit per household will be. We are
bullish on cross-sell, we are confident on cross-sell, and we still believe that
we can get to an eight cross-sell.

52. Tolstedt’s response to the question posed by the analyst was materially misleading.
Though Tolstedt chose in responding to  offer reasons why the cross-sell metric could slow,
entirely absent from her response were the reasons that she understood that growth in the metric
had slowed: namely, the efforts by Wells Fargo to address sales misconduct and the reactions by
Wells Fargo bankers to those efforts.  Providing a truthful answer to investors would have linked
the effects of the sales practices misconduct to  the cross-sell metric.
53. Tolstedt further touted the cross-sell metric as purportedly showing growth and
indicating future revenue growth during the Investor Day Conference, despite the misgivings she
had, which she had shared internally at Wells Fargo, about the slowdown in its growth.  In her
prepared remarks she thus stated: “The beneficial cycle of cross-sell continues.  The more products
the customers have with us, the better deal and greater value we can provide.  The more business
they do with us, the longer they stay with us, giving us more opportunities to provide products they
might need over a lifetime.  Our retail bank cross-sell is now at 6.17 products, up from two years
ago 5.98, and at the time of the merger [with Wachovia in January 2009] we were at 5.2.  Our
long-term goal continues to be an average cross-sell of 8 and achieving this goal will come with
higher household purchase rates and growth in profitability.”
54. From Tolstedt’s slanted presentation, investors were led to believe that Wells Fargo
was executing its cross-selling strategy as intended, and that its results were strong.  Indeed, the
analyst who specifically asked about the cross-sell strategy and metric issued a report the following
day that reiterated:  “The main revenue opportunity in the Community Bank continues to be cross-

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selling,” and further summarized points raised by Tolstedt; of course, no mention was made of the
effects of sales misconduct on the metric.
Tolstedt Provides False Sub-Certification of Second Quarter 2014 Report
55. After the Investor Day Conference, Tolstedt continued to speak internally at the
bank about her concerns regarding the decline in the cross-sell metric, including her concern that
investors might conclude the decline was related to the sales misconduct issues.  Through the
summer months in 2014, Tolstedt worked closely with her staff to remain apprised of the level of
the metric.
56. During this period, Wells Fargo reported no growth in the cross-sell metric in its
public filings.  Thus, on August 6, 2014, Wells Fargo described in its quarterly report filed on
Form 10-Q for the second quarter (ended June 30, 2014) that the Community Bank cross-sell
metric was 6.17 as of May 2014.  The reported 6.17 figure was the same figure that Wells Fargo
had reported for the Community Bank’s cross-sell metric during its first quarter (ended March 31,
2014).
57. Tolstedt was well aware of the reported cross-sell metric in Wells Fargo’s second
quarter 2014 Form 10-Q, as she closely reviewed the disclosures in the Form 10-Q before it was
filed with the SEC.  Indeed, Wells Fargo employed a process each quarter in which Tolstedt was
required to review and provide input to ensure the accuracy of the information reported about the
Community Bank.  To indicate her completed review and approval of the information as presented,
Tolstedt was also required to certify to the accuracy of the information.
58. To do so, each quarter, Tolstedt was supplied a draft of the quarterly or annual
report, and specific information about the sections of the report that she needed to review, and if
necessary, to  edit.  Tolstedt was informed that she was provided the draft report in order to affirm
the accuracy of the information and to make any needed changes.  Based on her experience with
dozens of quarterly and annual reports, by 2014 Tolstedt knew that her sub-certification of the
accuracy of a draft report would result in the dissemination to  investors of the information about
the Community Bank.  Thus, in or around late July 2014, Tolstedt received from the Community
Bank’s controller’s office the draft quarterly report for the second quarter of 2014 (ended June 30,

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2014).  In addition to a printed copy of the draft quarterly report, Tolstedt was also provided by
email an outline of the areas of particular interest to her, and areas that had changed from prior
reporting periods.
59. Tolstedt reviewed closely the portions of the second quarter 2014 report on Form
10-Q that related to the Community Bank, including the cross-sell metric.  For instance, during
discussions at the end of July 2014 with the Community Bank’s controller, Tolstedt asked
questions about Wells Fargo’s disclosures regarding the cross-sell metric and strategy.  Tolstedt
stated as well:  “Reminder:  We need to watch how we use cross-sell.  Right now, we have some
year over year growth but we are flat linked quarter.”
60. In early August 2014, Tolstedt received the revised draft of the quarterly report for
the second quarter 2014.  On or about August 6, 2014, Tolstedt made a sub-certification in writing
to the CEO and to the CFO that “to [her] knowledge based on [her] position with the [Community
Bank], the financial and other information provided by the [Community Bank] and recorded in the
General Ledger, and the financial and other disclosures separately provided by the Group for the
[second quarterly] Report do not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading for the periods covered by the Report.”   In her sub-
certification, Tolstedt stated that she understood that, in signing the second quarter 2014 report on
Form 10-Q, the CEO and CFO were relying on her certifications.
61. Tolstedt further affirmed that, “to [her] knowledge based on [her] review of the
[second quarterly] Report Draft,” the filing did not contain any material misstatements or
omissions.  Tolstedt stated in the sub-certification that she understood that “information is
‘material’ if an investor would consider it important in making an investment decision about the
Company’s securities or if it would significantly alter the total mix of information available in the
marketplace.”
62. Notwithstanding Tolstedt’s sub-certification, Wells Fargo’s second quarter 2014
report on Form 10-Q (for the period ended June 30, 2014), which was filed with the SEC on or
around August 6, 2014, was materially false and misleading.  In particular, the report included

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several statements, as detailed above, describing the Community Bank’s cross-sell strategy as
purportedly selling to customers products they needed and wanted, and the metric as purportedly
measuring the success of such a needs-based strategy.  In reality, as Tolstedt knew, the reported
cross-sell metric of 6.17 as of May 2014 was inflated by accounts and products that resulted from
sales misconduct and were not needed or wanted by customers, but were unauthorized or unused.
63. The misleading statements and omissions of fact in Wells Fargo’s second quarter
2014 report on Form 10-Q were material.  The report materially misstated to investors the extent to
which the inclusion of unused, unneeded, and unauthorized accounts in the cross-sell metric had
inflated the reported number.  The report also created the materially false and misleading
impression that Wells Fargo’s strategy was to cross-sell products that customers valued and used,
and it omitted the material fact that the strategy resulted in the inclusion of a significant number of
unused, unneeded, and unauthorized accounts.
Tolstedt Provides False Sub-Certification of Third Quarter 2014 Report
64. Despite the materially inflated cross-sell metric reported by Wells Fargo, Tolstedt
remained concerned that the metric reported quarterly would not be well received by investors,
because of the perceived “flattening” in the growth of the metric.  Indeed, as the third quarter 2014
was winding up, on or around September 30, 2014, Tolstedt understood that the Community Bank
would report, for the first time, a decrease to the cross-sell metric for the third quarter.  While the
reported metric for the second quarter 2014 was 6.17, the metric for the third quarter 2014 was
6.15.
65. Wells Fargo thus reported in its third quarterly report filed on Form 10-Q (for the
period ended September 30, 2014), which was filed with the SEC on or about November 5, 2014:
“We continued our focus on meeting customers’ financial needs and creating long-term value for
shareholders. Compared with a year ago:  . . . we continued to maintain our solid customer
relationships across our company with Retail Banking cross-sell of 6.15 products per household”
as of August 2014.
66. Wells Fargo’s third quarter 2014 report on Form 10-Q was materially false and
misleading, as it presented the cross-sell metric of 6.15 as purportedly measuring the success of a

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needs-based strategy, when in reality, as Tolstedt knew, the metric was significantly inflated by
accounts and products that were the results of sales misconduct and were not needed or wanted by
customers, but were unauthorized or unused.
67. As Tolstedt had done for the prior quarter, she closely reviewed the draft third
quarter 2014 report on Form 10-Q, including the representations about the Community Bank’s
cross-sell strategy and its reported metric, described above, before it was filed.  For instance,
Tolstedt asked the Community Bank’s controller questions about what disclosures Wells Fargo
had made about its cross-sell metric, and Tolstedt questioned whether Wells Fargo should discuss
the metric differently going forward in light of the fact that Tolstedt expected that the metric would
no longer grow over the coming quarters.  The Community Bank’s controller supplied Tolstedt
with the disclosure that Wells Fargo had incorporated into the quarterly report and noted that
Tolstedt had the opportunity to review and revisit the disclosures made.  Based on her experience,
Tolstedt knew that her sub-certification of the accuracy of the draft report would result in the
dissemination to investors of the information about the Community Bank in the report to investors.
68. Tolstedt nevertheless confirmed the accuracy of the third quarter 2014 report.  On
or about November 5, 2014, she provided her sub-certification that, “to [her] knowledge based on
[her] review of the [third quarterly] Report Draft,” the filing did not contain any material
misstatements or omissions.  Indeed, Tolstedt further affirmed to the CEO and to the CFO that the
financial and other disclosures provided by the Community Bank for the third quarter 2014 report
on Form 10-Q did not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances in which the statements
were made, not misleading.
69. The misleading statements and omissions of fact in Wells Fargo’s third quarter
2014 report filed with the SEC on Form 10-Q were material.  The report materially misstated to
investors the extent to which the inclusion of unused, unneeded, and unauthorized accounts in the
cross-sell metric had inflated the reported number.  The report also created the materially false and
misleading impression that Wells Fargo’s strategy was to cross-sell products that customers valued
and used, and it omitted the material fact that the strategy resulted in the inclusion of a significant

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number of unused, unneeded, and unauthorized accounts.
Community Bank Confirms Misleading Metric in 2014 Annual Report
70. Despite Tolstedt’s consideration of potential changes to the reported cross-sell
metric in  2014, Tolstedt concluded the Community Bank would not change how cross-sell was
reported.  Then, on or around December 29, 2014, Wells Fargo received an inquiry from the
Securities and Exchange Commission’s Division of Corporation Finance asking:

In your quarterly reports, as well as your annual reports and in earnings calls, you
discuss the fact that your cross-sell program is a key element that management believes
will help Wells Fargo meet its strategic goals.  Please provide us with an explanation of
the methodology you use to calculate the products per household and products per
customer metrics, as discussed on page 3, and on pages 44 and 45 of your 2013 Annual
Report.  Also, please tell us to what extent your methodology for calculating the metric
has changed over the last five years.
71. Tolstedt received the letter from Wells Fargo’s Controller, to whom it had been
addressed, shortly after it arrived. The next morning she sent it to two trusted lieutenants of hers,
with the subject line: “urgent!” and began her message: “FOR YOUR EYES ONLY. PLEASE DO
NOT FORWARD. Confidential.” Tolstedt directed her team to help with responding to the query.
Over the next two weeks, they prepared a response to the SEC staff on behalf of Wells Fargo,
dated January 12, 2015, which stated:

Our cross-sell strategy is to increase the number of products our customers utilize by
offering them all of the financial products they need... We report cross-sell metrics for
our Community Banking and Wealth, Brokerage and Retirement (WBR) operating
segments based on the average number of retail products used per retail banking
household.  For Community Banking the cross-sell metric represents the relationship of
all retail products used by customers in retail banking households. (Emphasis added.)

72. The same language in the response was also included in Wells Fargo’s 2014
Annual Report filed with SEC with its Form 10-K.  The 2014 Annual Report thus represented that
the cross-sell metric for the Community Bank is “based on the average number of retail products
used per retail banking household.” (Emphasis added.)
73. Similar to the process Tolstedt followed for the quarterly reports filed earlier in the
year, in  January 2015, Tolstedt was provided by the Community Bank controller the draft 2014
Annual Report with specific reference to the portions of the report that addressed the Community
Bank.  As she had done for the quarterly reports, Tolstedt reviewed the 2014 Annual Report

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closely.  Based on her experience, Tolstedt knew that her sub-certification of the accuracy of the
draft report would result in the dissemination to investors of the information about the Community
Bank.
74. On or about February 25, 2015, Tolstedt provided her sub-certification to the CEO
and CFO, stating that she had reviewed the 2014 Annual Report and that, “to [her] knowledge
based on [her] position with the [Community Bank], the financial and other information provided
by the [Community Bank] and recorded in the General Ledger, and the financial and other
disclosures separately provided by the Group for the Report do not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading for the periods covered by
the Report.”
75. Wells Fargo filed its 2014 Annual Report and Form 10-K with the SEC on or
around February 25, 2015.  In it, Wells Fargo again informed investors that the Company’s cross-
sell strategy was an important strategy and that the cross-sell metric was monitored to determine
whether Wells Fargo was satisfying its customers’ needs. Wells Fargo thus described its strategy:
“Cross-sell Our cross-sell strategy is to increase the number of products our customers use by
offering them all of the financial products that satisfy their financial needs.”  (Emphasis added.)
The Annual Report further stated: “For Community Banking the cross-sell metric represents the
relationship of all retail products used by customers in retail banking households.” (Emphasis
added.)
76. Wells Fargo also stated in the 2014 Annual Report: “Our retail banking household
cross-sell was 6.17 products per household in November 2014, up from 6.16 in November 2013
and 6.05 in November 2012. . . . We believe there is more opportunity for cross-sell as we continue
to earn more business from our customers.”
77. Wells Fargo’s 2014 Annual Report was materially false and misleading.  In
particular, the report included the misleading statements, including those set forth above, that
described the Community Bank’s cross-sell strategy as one that involved selling to customers
products they needed and wanted.  Wells Fargo further elaborated, as described above, how its

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Community Bank cross-sell metric purportedly measured the success of this strategy by measuring
the number of supposedly revenue-generating accounts and products per customer household,
which were “used.”  In reality, as Tolstedt knew, the reported cross-sell metric of 6.17 was
significantly inflated by accounts and products that resulted from sales misconduct and were not
needed or wanted or used by customers, but were unauthorized or unused.
78. The misleading statements and omissions of fact in Wells Fargo’s 2014 Annual
Report filed with the SEC with its Form 10-K were material.  The report materially misstated to
investors the extent to which the inclusion of unused, unneeded, and unauthorized accounts in the
cross-sell metric had inflated the reported number.  The report also created the materially false and
misleading impression that Wells Fargo’s strategy was to cross-sell products that customers valued
and used, and it omitted the material fact that the strategy resulted in the inclusion of a significant
number of unused, unneeded, and unauthorized accounts.
Tolstedt Provides False Sub-Certifications, While Minimizing Sales Fraud to Board
79. During the first half of 2015, Tolstedt continued to ask members of her team whom
she supervised in the Community Bank to find more information regarding the flattening and
decline of the cross-sell metric.  Her team recognized, and discussed with her, that the metric had
stalled due to the significant level of unused accounts that had been sold in the past and that were
increasingly falling out of the metric and not being replaced by new sales; those unused accounts
that remained did not represent new opportunities for revenue or for further sales.  While Tolstedt
had many frank conversations with her own staff about how the sales misconduct continued to
affect the Community Bank’s reported cross-sell metric, Tolstedt’s discussions outside of the
Community Bank—including to members of the board of directors—were less forthcoming.
80. In particular, during the spring of 2015, the Risk Committee of the Wells Fargo
board of directors sought to learn from Tolstedt the extent of the sales fraud and sales integrity
issues at the Community Bank.  The board’s Risk Committee was ultimately responsible for
overseeing the many sources of risk to the bank, including reputational and operational risks.  The
board’s Risk Committee was separate and apart from other risk management functions, including
an enterprise-wide risk committee, and the risk function of the Community Bank.  The Chief Risk

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Officer, who reported to the board’s Risk Committee, coordinated with Tolstedt to obtain her
appearance at a meeting of the board’s Risk Committee on or around April 28, 2015.
81. During the April 28, 2015 meeting, the Chairman of the Risk Committee did not
believe that Tolstedt answered the relevant questions to the committee’s satisfaction.  As Tolstedt
had been informed prior to the meeting, the committee sought information about the extent of the
sales misconduct problem that had begun to surface in 2013, including the extent and causes of the
problem, and any efforts to address the problems. Tolstedt’s presentation failed to address the
substance and scope of the sales misconduct, including the types of misconduct that had taken
place and the number of accounts likely affected.  As a result, the Chairman requested that Tolstedt
make a further presentation at the next meeting of the board’s Risk Committee; he also spoke to
the CEO and Chief Risk Officer about his dissatisfaction with Tolstedt’s presentation.
82. One week later, on or about May 5, 2015, Wells Fargo learned that the City of Los
Angeles had sued the Company for harm it claimed Wells Fargo had caused customers related to
the sales integrity issues.  As a result of the information received from Tolstedt and the Community
Bank, members of the board of directors thought the lawsuit came out of the blue, as it presented a
sales integrity problem well beyond anything they had been made aware of.
83. Tolstedt was informed by the CEO that her further presentation to the board’s Risk
Committee regarding the sales integrity issues was expected to be the first order of business in a
meeting on May 19, 2015.  Tolstedt provided a draft of the presentation that she intended to share
during the meeting to the CEO a few days before the meeting.  The CEO told her that the Risk
Committee would want more supporting information, including the number of Wells Fargo
employees terminated for sales practices violations in the past 12 months versus prior periods; the
percentage of the sales staff that terminated for bad behavior; how Wells Fargo would make sure it
made impacted customers “whole”; and how many accounts were opened or products sold in 2013,
2014, and the beginning of 2015 without the knowledge of the customers.  The CEO was not
available to attend the meeting with Tolstedt.
84. Despite the specific information that the CEO informed Tolstedt the Risk
Committee wanted to know, Tolstedt’s presentation to the Risk Committee in May 2015 lacked

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such specifics and focused instead on a subset of conduct.  For instance, Tolstedt’s written
materials described a particular effort to identify certain sales misconduct violations, which had
resulted in a total of approximately 230 terminations of employees.  Not described in those
materials were the more than 1,000 employees who were terminated annually for sales integrity
violations.  Tolstedt also told the Committee that the incentives used by the Community Bank were
not the cause of the problems.  Despite Tolstedt’s selective presentation, members of the board
considered the sales integrity issues a serious risk to the bank.  Accordingly, the Committee hired a
consultant to attempt to determine the scope of the sales problems that they did not learn from
Tolstedt.
85. Just as she minimized the sales integrity problems to the board members, Tolstedt
continued to provide misleading sub-certifications to the CEO and CFO for the first two quarters
of 2015.  Prior to Wells Fargo filing the Forms 10-Q for the first and second quarters of 2015,
Tolstedt closely reviewed drafts of each of the reports, including the representations about the
Community Bank’s cross-sell strategy and its reported metric.  Based on her experience, Tolstedt
knew that her sub-certification of the accuracy of the draft report would result in the dissemination
to investors of the information about the Community Bank in the report to investors.
86. Nevertheless, for each report, Tolstedt confirmed the accuracy, sub-certifying that,
“to [her] knowledge based on [her] review of the Report Draft,” the Form 10-Q did not contain any
material misstatements or omissions.  Tolstedt provided her further sub-certification that the
financial and other disclosures provided by the Community Bank for both the first and second
quarter 2015 reports did not contain any untrue statements of material fact or omit to state material
facts necessary to make the statements made, in light of the circumstances in which the statements
were made, not misleading.  Both sub-certifications for the first and second quarters—dated,
respectively, May 6, 2015 and August 5, 2015—were thus false and misleading when made.
87. Thus, on or about May 6, 2015, Wells Fargo filed its first quarter 2015 report on
Form 10-Q (for the period ended March 31, 2015) with the SEC in which it claimed, among other
things, that its “retail banking household cross-sell was 6.13 products per household in February
2015,” and further reiterated that its “approach is needs-based.”

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88. Similarly, Wells Fargo filed its second quarter 2015 report on Form 10-Q (for the
period ended June 30, 2015) with the SEC on or about August 5, 2015, in which it stated, among
other things, that its cross-sell strategy was “needs based,” and also reported “retail banking
household cross-sell was 6.13 products per household in May 2015.”
89. Wells Fargo’s first and second quarter 2015 reports on Forms 10-Q were materially
false and misleading, as each presented the cross-sell metric of 6.13 as purportedly measuring the
success of a “needs-based” strategy; in reality, the metric was significantly inflated by accounts
and products that resulted from sales misconduct and were not needed or wanted by customers, but
were unauthorized or unused.
90. The misleading statements and omissions of fact in Wells Fargo’s first and second
quarter 2015 reports filed with the SEC on Forms 10-Q were material.  The reports both materially
misstated to investors the extent to which the inclusion of unused, unneeded, and unauthorized
accounts in the cross-sell metric had inflated the reported number.  The reports both also created
the materially false and misleading impression that Wells Fargo’s strategy was to cross-sell
products that customers valued and used, and both reports omitted the material fact that the
strategy resulted in the inclusion of a significant number of unused, unneeded, and unauthorized
accounts.
Tolstedt Internally Proposes New Metric While Publicly Affirming Inflated Metric
91. During 2015, Tolstedt tasked her own team to identify other ways to measure and
present the cross-sell metric.  Tolstedt and her deputies were concerned that “idle” products and
“inactive” accounts were the cause of the slow and declining growth in the reported cross-sell
metric.
92. Thus, in July and August 2015, Tolstedt’s team shared with her analyses they had
developed to look at the inputs to the cross-sell metric that distinguished active, or used, accounts
from inactive, or unused, accounts.  They further identified that, because products such as debit
cards could remain in the metric for years with little or no activity, the reported metric included
many inactive accounts from periods where the sales misconduct was high.

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93. As Tolstedt and her team were completing their analyses for presentation to the
Company’s senior management, Tolstedt was again asked to make a presentation to the Risk
Committee of the board of directors regarding sales misconduct at the Community Bank.  The Risk
Committee meeting was scheduled in conjunction with meetings of the Wells Fargo full board of
directors meetings, which took place on October 26-27, 2015.
94. As Tolstedt was informed, the Risk Committee also heard a report during the
October 25 meeting from the outside consulting firm that had been retained to review the sales
misconduct issues.  The consulting firm reported to Wells Fargo’s board the weaknesses that
needed to be addressed by the Company to manage the ongoing adverse impact from sales
misconduct, and recommended, among other measures, that bankers be rewarded based on
whether accounts were used, rather than on the number of products sold.
95. Though Tolstedt presented on many of the same issues as the outside consulting
firm during the October 2015 meeting, she denied that structural issues were a cause of the
misconduct, and Tolstedt did not describe to the board the analyses regarding active and inactive
accounts.  The Chairman of the Risk Committee found Tolstedt’s presentation inadequate, and in a
subsequent meeting with the CEO, he and another board member recommended that Tolstedt be
replaced as head of the Community Bank.
96. During the final months of 2015, Tolstedt’s team shared with her the results of their
analyses regarding the cross-sell metric.  In November 2015, the team presented to Tolstedt a new
cross-sell metric that only included active accounts.  Their research concluded that more than 10
percent of household accounts that had been included in the reported cross-sell metric were
inactive within a six-month period, and that more than half of retail bank households held at least
one inactive account.

 Their work demonstrated the sources of the “inactive” or “idle” accounts as
well; for instance, debit cards were sold in high volume and thus accounted for 29 percent of total
accounts, but 30 percent of the debit cards remained inactive in any given month.
97. Tolstedt and her team presented their findings in January 2016 to the CEO and the
COO, recommending the new metric—which they dubbed “active cross-sell”—be ready for

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presentation publicly by the time of Wells Fargo’s 2016 Investor Day conference later in the
spring.
98. As Tolstedt’s presentation explained, the Community Bank should make two
changes to its reported cross-sell metric.  One change would redefine the measured “household,”
which change, on its own, would have the effect of making the cross-sell metric a larger number.
The second, and more significant change, was to include in the number of products counted only
those products that customers actively used, which change would have the effect of making the
cross-sell metric smaller.  To illustrate, the presentation used the data that had been included for
the reported cross-sell metric in the third quarter 2015 Form 10-Q, and compared the reported
cross-sell metric with the newly-proposed metric:  “Current [Cross-sell]:  6.13     Active Cross-sell
5.17.”
99. Tolstedt and her team thus demonstrated that by restricting the cross-sell metric to
products actually “used,” the number changed substantially.  Tolstedt and her team also expected
that, unlike the then-reported cross-sell metric that was laden with inactive accounts, the “active
cross-sell” metric would likely show growth much sooner.
100. At the same time that Tolstedt was discussing—first with her own team, and then
with the larger management team—the disparity between the reported cross-sell metric and the
number of accounts that were actually used, Tolstedt was called upon to review and sub-certify
Wells Fargo’s third quarter 2015 report on Form 10-Q, and then Wells Fargo’s year-end 2015
Annual Report.  Based on her experience, Tolstedt knew that her sub-certification of the accuracy
of the draft report would result in the dissemination to investors of the information about the
Community Bank in the report to investors.
101. For instance, during her review of the draft third quarter 2015 report, Tolstedt
was alerted to changes that had been made to the cross-sell disclosures in the prior quarter Form
10-Q, which stated for the first time that some customers would need “more products” and some
“fewer.”  Although minor edits were made to the third quarter 2015 Form 10-Q to conform the
report to the prior revisions, Tolstedt did not revise the disclosures, either in the draft Form 10-Q or

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in the 2015 Annual Report, to reflect the analyses about the cross-sell metric that she had directed
her team to complete for the Community Bank.
102. Instead, on or about November 4, 2015, Tolstedt confirmed the accuracy of the
draft, third quarter 2015 report, and on or about February 24, 2016, Tolstedt confirmed the
accuracy of the draft Annual Report.  For each, she provided to the CEO and the CFO her sub-
certification that, “to [her] knowledge based on [her] review of the Report Draft,” the quarterly and
the annual reports did not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances in which the statements
were made, not misleading.
103. On or about November 4, 2015, Wells Fargo filed its third quarter 2015 report on
Form 10-Q (for the period ended September 30, 2015) stating, among other things, that its “cross-
sell strategy” was “needs based,” and that the Community Bank’s “retail banking household cross-
sell was 6.13 products per household in August 2015.”  Similarly, on or about February 24, 2016,
Wells Fargo filed with the SEC its 2015 Annual Report with its Form 10-K for the year ended
December 31, 2015, in which it reiterated that its “approach to cross-sell is needs-based.”  Wells
Fargo further stated that its cross-sell metric tracked the degree to which it satisfied customers’
needs, and reported the Community Bank’s “retail banking household cross-sell was 6.11 products
per household in November 2015.”
104. Wells Fargo’s third quarter 2015 Form 10-Q and its 2015 Annual Report filed
with its Form 10-K were both materially false and misleading.  Wells Fargo claimed that the
reported values for the Community Bank’s cross-sell metric, 6.13 and 6.11 respectively, measured
retail products used by customers in retail banking households, when, in reality, Tolstedt knew that
the reported cross-sell metric contained a significant amount of products that were not used by
customers.  As Tolstedt was aware, the reported cross-sell metric was inflated by accounts and
products that resulted from sales misconduct and were not needed or wanted by customers, but
were unauthorized or unused.
105. The misleading statements and omissions of fact in Wells Fargo’s third quarter
2015 Form 10-Q and its 2015 Annual Report filed with its Form 10-K were material.  Each report

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materially misstated to investors the extent to which the inclusion of unused, unneeded, and
unauthorized accounts in the cross-sell metric had inflated the reported number.  Both the quarterly
and the annual report also created the materially false and misleading impression that Wells
Fargo’s strategy was to cross-sell products that customers valued and used, and they both omitted
the material fact that the strategy resulted in the inclusion of a significant number of unused,
unneeded, and unauthorized accounts.
Tolstedt Continues to Promote Misleading Cross-Sell Metric Until Her Departure
106. Through January and February 2016, Tolstedt and her team prepared for the
presentation of the new, “active cross-sell” metric, to be publicly presented during Wells Fargo’s
2016 Investor Day conference, scheduled for May 2016.  Consistent with their presentations
internally, the first drafts of their presentation revealed that as much as 20 percent of accounts
included in the then-reported cross-sell metric were “inactive.”  However, by the end of February,
the team removed the explicit reference to “inactive” accounts from drafts the team circulated
internally, due to concerns that investors would make the connection between “inactive” accounts
and the sales misconduct that continued to have an ongoing influence on Wells Fargo’s reported
metric.
107. By mid-March 2016, Tolstedt’s team replaced the term “active cross-sell” with
“dynamic cross-sell” in drafts of her expected presentation for similar reasons.  Also in early
March 2016, Tolstedt met with a securities analyst who followed Wells Fargo’s securities closely
and who made recommendations to investors about buying, selling, or holding the Company’s
securities.  In the meeting, the analyst was informed that Wells Fargo would cross sell if it added
value to customers and “only cross sell products which customers value and will use.”  Tolstedt
failed to disclose during this meeting that many of the accounts and products included in the
Community Bank’s cross-sell metric were not used by customers.
108. Finally, by the time the 2016 Investor Day conference occurred, on or around
May 24, 2016, the Community Bank’s presentation was substantially changed from the original
conception of introducing the new, “active cross-sell” metric.  The written presentation did not
include any reference to a new, or revised cross-sell metric.  It also did not include any

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comparisons between “active” accounts and “inactive” accounts.  Nor did it describe information
from which investors could discern that “active” accounts were but a portion of the accounts
included in the reported cross-sell metric.
109. In delivering the presentation for the Community Bank at the 2016 Investor Day
conference, Tolstedt was again called upon to answer questions about the decline in the reported
cross-sell metric.  In particular, one invited participant observed that the decline in the metric was
“a bit of a change” for the Community Bank and asked whether the decline reflected either “an
inevitable saturation” or “a need for new products.”
110. In response, Tolstedt acknowledged that there had been “headwinds.”  However,
she attributed the decline in the cross-sell metric to strong checking account growth, and “the
interest rate environment” for causing some products not to be “particularly appealing to our
customers right now.”  Tolstedt did not mention in her misleading response any of the information
about “active” or “inactive” accounts, or the fact that the reported metric continued to decline as
“inactive”—that is, unused, unwanted, and unauthorized products that were the result of sales
misconduct—slowly rolled off the metric and were not replaced.
111. Prior to, and shortly after, the 2015 Investor Day conference, Tolstedt closely
reviewed, and affirmed the accuracy of, two additional quarterly reports on Forms 10-Q.  Based on
her experience, Tolstedt knew that her sub-certification of the accuracy of the draft reports would
result in the dissemination to investors of the information about the Community Bank in the
reports to investors.  Thus, Tolstedt on or about May 4, 2016, and on or about August 3, 2016,
provided her sub-certifications to the CEO and CFO of the first and second quarter 2016 reports,
stating for each that, “to [her] knowledge based on [her] review of the Report Draft,” the Forms
10-Q did not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances in which the statements were
made, not misleading.  Accordingly, Wells Fargo filed its first quarter 2016 report on Form 10-Q
(for the period ended March 31, 2016) with the SEC on or about May 4, 2016 and its second
quarter 2016 report on Form 10-Q (for the period ended June 30, 2016) on or about August 3,
2016.

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112. In the first quarter 2016 Form 10-Q, Wells Fargo reiterated that its “cross-sell
strategy” was “needs based,” and claimed that the Community Bank’s “retail bank household
cross-sell was 6.09 products per household in February 2016.”  The Form 10-Q was materially
false and misleading, as the reported metric remained significantly inflated by accounts and
products that were the results of sales misconduct and were not needed or wanted by customers,
but were unauthorized or unused.
113. In the second quarter 2016 Form 10-Q, Wells Fargo again stated that its “cross-
sell strategy” was “needs based,” but Wells Fargo stated that it determined to change the
Community Bank’s cross-sell metric “to include only those households that maintain a retail
checking account.”  The revised cross-sell metric thus reflected the first of the two changes that
Tolstedt had proposed in January 2016.  Yet, the second, more significant change described in
January, which would have included only accounts actively used, was absent.  As a consequence,
Wells Fargo reported an even higher value for the cross-sell metric:  “Our Community Banking
cross-sell metrics, as revised for prior periods to conform to the current period presentation, were
6.28, 6.32, 6.31, 6.37 and 6.36 as of February 2016, May 2015 and November 2015, 2014 and
2013, respectively.”
114. Wells Fargo’s second quarter 2016 report on Form 10-Q was materially false and
misleading, as it presented the cross-sell metric of 6.28 as purportedly measuring the success of a
str   ategy that was based on its customers’ “needs.”  In truth, the metric remained significantly
inflated by accounts and products that were the results of sales misconduct and were not needed or
wanted by customers, but rather unauthorized or unused.
115. The misleading statements and omissions of fact in Wells Fargo’s first and
second quarter 2016 Forms 10-Q filed with the SEC were material.  Each report materially
misstated to investors the extent to which the inclusion of unused, unneeded, and unauthorized
accounts in the cross-sell metric had inflated the reported number.  Both reports also created the
materially false and misleading impression that Wells Fargo’s strategy was to cross-sell products
that customers valued and used, and they both omitted the material fact that the strategy resulted in
the inclusion of a significant number of unused, unneeded, and unauthorized accounts.

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116. Tolstedt knew, or was reckless in not knowing, that the statements she made to
the public and Wells Fargo’s public statements that she reviewed (and the accuracy of which she
sub-certified) in its annual and quarterly reports filed with the SEC during 2014, 2015, and 2016,
and in materials incorporated into those reports, regarding the Community Bank’s cross-sell
strategy and its cross-sell metric were false and misleading.
117. Tolstedt also knew, or was reckless in not knowing, that her conduct in publicly
describing the Community Bank’s cross-sell strategy and its metric, and in sub-certifying the
accuracy of the annual and quarterly reports during 2014, 2015, and 2016, operated as a fraud or
deceit and created a false and misleading impression to Wells Fargo’s investors.
118. At the same time Tolstedt engaged in the above acts and deceptions that sowed
misinformation, she also sold shares in Wells Fargo, which she owned either directly or indirectly,
and profited.  For instance, in November 2014, Tolstedt sold shares of Wells Fargo stock for more
than $11.8 million.
F. Wells Fargo Resolves Lawsuits; Tolstedt Departs Bank
119. On or around July 12, 2016, Wells Fargo announced, in a release that was filed
with the SEC, that Tolstedt was retiring at the year’s end, and would leave her position as head of
Community Banking as of July 31, 2016.
120. On September 8, 2016, Wells Fargo announced that it had entered into
settlements with governmental authorities including the CFPB, the City of Los Angeles, and the
OCC, all related to charges of sales practice misconduct within the Community Bank.  Following
the Company’s announcement of the settlements, Wells Fargo’s stock experienced significant
declines in the market value of its shares, decreasing its market capitalization by billions of dollars.
121. Shortly after the announced settlements, on September 27, 2016, Wells Fargo
announced publicly that the Company and Tolstedt had reached an agreement that she “would
separate from employment effective September 27, 2016, that Ms. Tolstedt would not exercise any
outstanding stock options previously awarded by the Company until the completion of the ongoing
investigation being conducted by the Company and its Board of Directors and that, at the

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conclusion of such investigation, the Board of Directors would have the authority to determine the
extent to which such options will be forfeited.”
FIRST CLAIM FOR RELIEF
Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
122. The SEC re-alleges and incorporates by reference Paragraph Nos. 1 through 121.
123. By engaging in the conduct described above, Defendant Tolstedt and Wells Fargo
& Company, each, directly or indirectly, in connection with the purchase or sale of securities, by
the use of means or instrumentalities of interstate commerce, or the mails, with scienter:
(a) Employed devices, schemes, or artifices to defraud;
(b) Made untrue statements of material fact or omitted to state material facts
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading; and
(c) Engaged in acts, practices, or courses of business which operated or would
operate as a fraud or deceit upon other persons, including purchasers and
sellers of securities.
124. By engaging in the acts and conduct alleged above, Defendant Tolstedt
knowingly or recklessly provided substantial assistance to Wells Fargo & Company, and to other
persons employed by the Company, in violation of Section 10(b) of the Exchange Act [15 U.S.C.
§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], and thereby aided and abetted such
violations, and unless restrained and enjoined, will continue to violate these provisions.
125. By reason of the foregoing, Defendant Tolstedt violated, and unless restrained
and enjoined will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and
Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
SECOND CLAIM FOR RELIEF
Violations of Sections 17(a)(1), (2), and (3) of the Securities Act
126. The SEC re-alleges and incorporates by reference Paragraph Nos. 1 through 121.

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127. By engaging in the conduct described above, Defendant Tolstedt, directly or
indirectly, in the offer or sale of securities, by use of the means or instruments of transportation or
communication in interstate commerce or by use of the mails:
(a) With scienter, employed devices, schemes, or artifices to defraud;
(b) Obtained money or property by means of untrue statements of material fact
or by omitting to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were
made, not misleading; and
(c) Engaged in transactions, practices, or courses of business which operated or
would operate as a fraud or deceit upon purchasers.
128. By reason of the foregoing, Defendant Tolstedt violated, and unless restrained
and enjoined will continue to violate, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].
THIRD CLAIM FOR RELIEF
Aiding and Abetting Violations of Exchange Act Reporting Requirements
129. The SEC re-alleges and incorporates by reference Paragraph Nos. 1 through 121.
130. As an issuer of securities registered with the SEC, Wells Fargo was required to
file with the SEC annual and quarterly reports, in accordance with applicable rules and regulations,
which included information as necessary to make the statements made in the reports, in the light of
the circumstances under which they were made not misleading.  By the conduct described above,
Wells Fargo & Company failed to do so, in violation of Section 13(a) of the Exchange Act [15
U.S.C. § 78m(a)], and Rules 13a-1, 13a-13, and 12b-20 thereunder [17 C.F.R. §§ 240.13a-1,
240.13a-13, and 240.12b-20].
131. By engaging in the acts and conduct alleged above, Defendant Tolstedt
knowingly or recklessly provided substantial assistance to Wells Fargo & Company, and to other
persons employed by the Company, in violation of Section 13(a) of the Exchange Act [15 U.S.C. §
78m(a)], and Rules 13a-1, 13a-13, and 12b-20 thereunder [17 C.F.R. §§ 240.13a-1, 240.13a-13,
and 240.12b-20], and thereby aided and abetted such violations, and unless restrained and
enjoined, will continue to violate these provisions.

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FOURTH CLAIM FOR RELIEF
Aiding and Abetting Violations of Exchange Act Books and Records Requirements
132. The SEC re-alleges and incorporates by reference Paragraph Nos. 1 through 121.
133. As an issuer of securities registered with the SEC, Wells Fargo & Company was
required to make and keep books, records, and accounts, which, in reasonable detail, accurately
and fairly reflected the transactions and disposition of the assets of the Company.  By the conduct
described above, Wells Fargo & Company failed to do so, in violation of Section 13(b)(2)(A) of
the Exchange Act [15 U.S.C. § 78m(b)(2)(A)].
134. aBy engaging in the acts and conduct alleged above, Defendant Tolstedt
knowingly or recklessly provided substantial assistance to Wells Fargo & Company, and to other
persons employed by the Company, in violation of Section 13(b)(2)(A) of the Exchange Act [15
U.S.C. § 78m(b)(2)(A)], and thereby aided and abetted such violations, and unless restrained and
enjoined, will continue to violate this provision.
PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that this Court:
I.
Permanently enjoin Defendant from directly or indirectly violating Sections 10(b), 13(a),
and 13(b)(2)(A) of the Exchange Act [15 U.S.C. §§ 78j(b), 78m(a), and 78m(b)(2)(A)], and
Rules 10b-5, 13a-1, 13a-13, and 12b-20 thereunder [17 C.F.R. §§ 240.10b-5, 240.13a-1, 240.13a-
13, and 240.12b-20], and Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].
II.
Issue an order requiring Defendant to pay disgorgement of ill-gotten gains or unjust
enrichment obtained or derived from such violations, and to pay a civil monetary penalty pursuant
to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)], and Section 21(d) of the Exchange Act
[15 U.S.C. § 78u(d)(3)].
III.
Prohibit Defendant from serving as an officer or director of any entity having a class of
securities registered with the SEC pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l] or

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that is required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)],
pursuant to Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)] and Section 21(d)(2) of the
Exchange Act [15 U.S.C. § 78u(d)(2)].
IV.
Retain jurisdiction of this action in accordance with the principles of equity and the Federal
Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees
that may be entered, or to entertain any suitable application or motion for additional relief within
the jurisdiction of this Court.
V.
Grant such other and further relief as this Court may determine to be just and necessary.

Dated:  November 13, 2020   Respectfully submitted,

  /s/ Rebecca Lubens
REBECCA LUBENS
Attorney for Plaintiff
SECURITIES AND EXCHANGE COMMISSION

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MONIQUE C. WINKLER (Cal. Bar No. 213031) 
  [email protected] 
SUSAN F. LAMARCA (Cal. Bar No. 215231) 
  [email protected]  
MARC D. KATZ (Cal. Bar No. 189534) 
  [email protected] 
REBECCA LUBENS (Cal. Bar No. 240683) 
  [email protected] 
ERIN E. WILK (Cal. Bar No. 310214) 
  [email protected] 
 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
44 Montgomery Street, Suite 2800 
San Francisco, CA 94104 
(415) 705-2500 (Telephone) 
(415) 705-2501 (Facsimile) 

SECURITIES AND EXCHANGE COMMISSION, 
 
  Plaintiff, 
 
 vs. 
 
CARRIE L. TOLSTEDT, 
 

  Defendant. 
 

Case No. 
 
 
COMPLAINT  

 
 

Plaintiff Securities and Exchange Commission (the “SEC”) alleges: 

SUMMARY OF THE ACTION 

1. For several years, Wells Fargo & Company (“Wells Fargo” or the “Company”) 

publicly claimed that its business strategy was to sell to existing retail banking customers products 

that they needed, wanted, and used, and that it was able to measure its success through its 

published “cross-sell metric” featured in its Annual Reports and public filings.  Wells Fargo 

publicly touted its cross-sell metric as a key business indicator that captured the products it had 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

 

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sold to customers that they needed, wanted, and used.  According to Wells Fargo, the cross-sell 

metric was supposed to represent the average number of products sold to households that had “the 

potential for revenue generation and long-term viability.”  

2. Defendant Carrie L. Tolstedt, who served as the Senior Executive Vice President of 

Community Banking for Wells Fargo, publicly discussed the cross-sell strategy, and the reported 

metric, as an important means for investors to distinguish Wells Fargo from its banking 

competitors.  

3. Contrary to these public statements, Tolstedt and Wells Fargo’s Community 

Bank—its largest operating segment—implemented a volume-based sales model in which 

employees sold volumes of products to existing customers, often with little regard to actual 

customer need or expected use.  For several years, until mid-2016, Wells Fargo opened millions of 

accounts or sold products that were unauthorized or fraudulent, and others that were unneeded and 

unwanted by retail banking customers.  The unused accounts and products were included in the 

Community Bank’s cross-sell metric, sometimes for years. 

4. Defendant Tolstedt misled investors and the public as to the value of Wells Fargo’s 

securities through false and misleading statements and by repeatedly providing misleading sub-

certifications as to the accuracy of the Company’s required quarterly and annual reports to 

shareholders.  These sub-certifications resulted in misleading statements being disseminated to 

investors in the Company’s quarterly and annual reports.  Consistent with Wells Fargo’s materially 

misleading public statements in its annual and quarterly reports, Tolstedt publicly described the 

cross-sell metric as a means of measuring Wells Fargo’s relationships with its customers.  Yet, as 

Tolstedt knew or was reckless in not knowing, the cross-sell metric appeared to be growing for 

years as it captured growth in products that resulted from rampant sales misconduct rather than 

measuring products that customers wanted, needed, and used.   

5. In late 2013, some of Wells Fargo’s aggressive and fraudulent sales practices began 

to surface through media reports, causing growth of the cross-sell metric to stall.  By May 2015, 

Wells Fargo faced the first of a series of government actions when the City of Los Angeles sued 

the Company based on certain sales practices in the Los Angeles area.  Yet Tolstedt continued, 

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through mid-2016, to publicly endorse the cross-sell metric to investors, while internally studying 

ways to eliminate the substantial number of idle or unused accounts that had kept the cross-sell 

metric from growing since early 2014.   

6. Rather than reveal to investors the extent to which the inclusion of unused, 

unneeded, and unauthorized accounts in the cross-sell metric had inflated the reported number, 

Tolstedt continued to falsely claim that Wells Fargo’s cross-sell strategy was to sell products that 

customers valued and used.  At the same time, Tolstedt also sold shares in Wells Fargo, which she 

owned either directly or indirectly, and profited.  For instance, in November 2014, Tolstedt sold 

shares of Wells Fargo stock for more than $11.8 million.   

7. In September 2016, Wells Fargo announced settlements with two federal agencies, 

the Consumer Financial Protection Bureau (“CFPB”) and the Office of the Comptroller of the 

Currency (“OCC”), and a settlement with the City of Los Angeles, of actions taken by the three 

governmental entities to address sales misconduct.  Shortly thereafter, the market price of Wells 

Fargo’s securities declined materially, reducing the Company’s market capitalization by billions of 

dollars as the market learned of the extensive misconduct.  Tolstedt departed from Wells Fargo that 

month.     

8. The SEC seeks an order from the Court enjoining Tolstedt from future violations of 

the securities laws; prohibiting Tolstedt from acting as an officer or director of any public 

company; requiring Tolstedt to pay a civil monetary penalty, and disgorgement of ill-gotten gains 

or unjust enrichment with prejudgment interest thereon; and providing for other appropriate relief. 

JURISDICTION AND VENUE 

9. The SEC brings this action pursuant to Sections 20(b) and 20(d) of the Securities 

Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b) and 77t(d)] and Sections 21(d) and 21(e) of the 

Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d) and 78u(e)]. 

10. This Court has jurisdiction over this action pursuant to Section 22(a) of the 

Securities Act, [15 U.S.C. § 77v(a)], and Section  27 of the Exchange Act [15 U.S.C. § 78aa].  

11. Defendant, directly or indirectly, made use of the means and instrumentalities of 

interstate commerce or of the mails in connection with the acts, transactions, practices, and courses 

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of business alleged in this complaint. 

12. Venue is proper in this District pursuant to Section 22(a) of the Securities Act, 

[15 U.S.C. § 77v(a)], and Section 27(a) of the Exchange Act [15 U.S.C. § 78aa(a)].  Acts, 

transactions, practices, and courses of business that form the basis for the violations alleged in this 

complaint occurred in the Northern District of California.   

13. Under Civil Local Rule 3-2(d), this civil action should be assigned to the San 

Francisco Division because a substantial part of the events or omissions which give rise to the 

claims alleged herein occurred in San Francisco County and defendant maintains a residence in 

San Francisco. 

DEFENDANT 

14. Carrie L. Tolstedt, age 60, resides in San Francisco, California and Scottsdale, 

Arizona.  Tolstedt was an Executive Officer of Wells Fargo, and served as Senior Executive Vice 

President of Community Banking at Wells Fargo from June 2007 until July 2016, shortly before 

she left the bank.  Tolstedt was compensated in the form of salary, equity awards, and other 

incentive compensation, among other things.   

15. During the investigation conducted by the staff of the SEC preceding this action, 

Tolstedt asserted her Fifth Amendment privilege in response to questions regarding the same 

subjects that comprise the allegations in this complaint.  Also during the investigation, Tolstedt 

entered into agreements by which she agreed that the running of any statute of limitations 

applicable to any action or proceeding against Tolstedt by the SEC, including any sanctions or 

relief that might be imposed, is tolled and suspended for the period beginning on May 20, 2019 

through December 9, 2020.     

RELEVANT ENTITY 

16. Wells Fargo & Company is a Delaware corporation based in San Francisco, 

California.  Wells Fargo’s common stock is registered under Section 12(b) of the Exchange Act, 

and its securities are quoted on the New York Stock Exchange under the ticker “WFC.”     

 

 

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FACTUAL ALLEGATIONS 

A. Wells Fargo Touts Its Business Strategy of Cross Selling, and the Key “Cross-

Sell” Metric the Community Bank Used to Measure Its Success 

17. As a public company, Wells Fargo filed with the SEC annual and quarterly reports 

that are publicly-accessible, and made and filed other frequent public announcements.  Among the 

required information, the Company reported annually and quarterly to its shareholders 

management’s analysis of how the Company and its operating segments, such as the Community 

Bank headed by Tolstedt, had executed on business strategies.   

18. In its quarterly and annual reports, during 2014, 2015, and 2016, Wells Fargo’s 

management described, as a core business strategy, that it sought to increase sales of products and 

accounts to its customers through what the Company termed a “cross-sell” strategy.  In particular, 

Wells Fargo characterized the core business strategy in its Community Bank as “needs-based” 

cross-sell.  In its 2014 Annual Report, the Company described the strategy as “increas[ing] the 

number of products our customers use by offering them all of the financial products that satisfy 

their financial needs.” (Emphasis supplied.)  

19. To further explain to shareholders, and to the public, its “needs-based” cross-sell 

strategy, in these required reports Wells Fargo referred to and incorporated its Vision & Values 

statement, which was prominently displayed on its website.  Wells Fargo’s Vision & Values 

statement in 2015 proclaimed:  “Our vision has nothing to do with transactions, pushing products, 

or getting bigger for the sake of bigness… We do not offer products that are inappropriate for our 

customers’ needs and circumstances.”  Reinforcing this statement, in its 2015 Annual Report, 

Wells Fargo stated:  “Our approach to cross-sell is needs-based as some customers will benefit 

from more products, and some may need fewer.”   

20. The Company pitched the cross-sell strategy to investors as a foundation of its 

revenue model.  Wells Fargo further informed investors that it used a performance metric to 

calculate the number of products per household that Community Bank customers used, which it 

called the “cross-sell metric.”  Wells Fargo claimed the cross-sell metric that purportedly measured 

the cross-sell strategy’s success was a leading indicator of revenue and earnings and a centerpiece 

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of its growth strategy for the Community Bank.  

21. For example, in its 2014 Annual Report to shareholders, Wells Fargo described its 

cross-sell strategy as “key to our ability to grow revenue and earnings especially during the current 

environment of slow economic growth and regulatory reform initiatives.”  Indeed, in each of its 

required quarterly and annual reports filed with the SEC from 2014 through the second quarter of 

2016, Wells Fargo reported the cross-sell metric for the Community Bank.  In addition, Wells 

Fargo typically explained how the cross-sell metric compared to prior quarters or annual periods.  

B. Sales Incentives Linked to the Cross-Sell Strategy Spur Banker Fraud that 

Falsely Inflated the Reported Metric   

22. The Community Bank, which Tolstedt led from 2007 through mid-2016, was the 

largest of Wells Fargo’s three business units, contributing more than half (and in some years more 

than three-quarters) of the Company’s revenue.  For the majority of this period, including from 

2013 through 2015, Tolstedt reported directly to the Chief Executive Officer.  In late 2015, 

Tolstedt began to report to the President, who in turn reported to the CEO. 

23.  The Community Bank was responsible for the everyday banking products sold to 

individuals and small businesses, including checking and savings accounts, certificates of deposit 

(“CDs”), debit cards, as well as more complex products.  The Community Bank was also 

responsible for managing the large network of bank branches, referred to within Wells Fargo as 

“stores,” as well as other sales channels through which Wells Fargo offered its products.   

24. The branches employed, among others, bankers who were generally responsible for 

offering accounts and financial products or services to customers.  The bankers reported up 

through managers of the branches to Regional Bank Executives, who reported to Tolstedt.  In 

addition, the persons who managed the various groups organized around products that the 

Community Bank offered also reported up to Tolstedt. 

25. The Community Bank also had financial and risk officers who reported to Tolstedt 

and assessed the Community Bank’s business progress and its risks.  Those persons provided 

information to the financial and risk officers for the Company overall, often after first discussing 

the information with Tolstedt.  In addition, at least quarterly, Tolstedt met with the CEO, and 

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frequently others, to discuss the business of the Community Bank and to make strategic plans.  In 

these meetings, Tolstedt discussed the cross-sell strategy, and reasons for upward and downward 

trends in the cross-sell metric.   

26. Through 2013, the Community Bank, led by Tolstedt, implemented a volume-

based sales model, which included sales and compensation plans that pressured bankers to sell 

products to existing customers, often without regard for any actual customer need or use.  Regional 

Bank Executives, managers, and front line bankers repeatedly raised objections to sales plans that 

left bankers little option but to sell unneeded products to customers.  Complaints about the sales 

goals were regularly escalated to Tolstedt.  The complaints specifically articulated that the sales 

goals were too high and that the goals, along with management pressure, incentivized employees 

to sell low-quality or valueless, duplicate products, sometimes through misconduct.   

27. For instance, in a June 2014 resignation email to Tolstedt and others, the resigning 

banker complained about multiple checking accounts being opened for individual customers and 

business package accounts that were not suitable to the customers’ needs, explaining:  “When 

tellers and bankers are stating repeatedly that they are only doing what their managers are 

instructing them to do, there should be a closer look at the practices of retail managers, district 

managers and area presidents.  There are numbers that need to be met but meeting those numbers 

at the expense of our customers, profitability and our shareholders is not good business. …  There 

are rampant practices to manipulate numbers.  . . .  I have spent a majority of my time here at Wells 

Fargo closing accounts for customers.  Reviewing profiles with more than 4 or 5 checking 

accounts which are opened and closed within months.  Businesses with package accounts that are 

not suitable to their needs.”   

28. Indeed, thousands of Wells Fargo employees engaged in unlawful conduct to sell 

products of no or low value to customers.  Between 2011 and 2016, tens of thousands of 

employees were the subject of allegations of unethical sales practices, and more than 5,300 

employees were terminated for customer-facing sales ethics violations, including falsifying bank 

records; more than 23,000 employees were referred for sales practices investigations and 

thousands received disciplinary action short of termination or resigned prior to the conclusion of 

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the Company’s investigations into their sales practices.  

29. Many of the unethical or illegal sales practices were referred to as “gaming” within 

Wells Fargo.  Those gaming practices included, among others:  employees’ creation of false 

records and forgery of customers’ signatures to open accounts that were not authorized by 

customers; employees’ alterations of customer phone numbers, email addresses, or physical 

addresses on account opening documents, either to prevent customers from finding out about 

unauthorized accounts, or to prevent customers from being contacted in customer satisfaction 

surveys; employees’ transferring funds from existing accounts of customers, without their consent, 

to a newly-opened but unauthorized account, in order to meet the funding criteria required to 

receive credit for “selling” the new account.  

30. When the Community Bank set employee annual sales goals at a level to achieve 

year-over-year sales growth, the base level of sales from the prior year included accounts or 

financial products resulting from unlawful misconduct or gaming.  This had the effect of imposing 

additional pressure on employees to continue gaming practices.   

31. During weekly meetings with Tolstedt, and in meetings with her deputies who 

described the discussions to Tolstedt, Regional Banking Executives pointed to the sales goals and 

incentive plans put in place by Tolstedt as leading to low-quality sales of products that went 

unused by customers.  However, Tolstedt deflected criticism of the sales model and incentive 

system, and was unwilling to change how sales were measured, fearful that such changes would 

adversely impact the cross-sell metric.     

32. As Wells Fargo discovered misconduct by front line bankers through 2013, the 

Company frequently fired the bankers but rarely made changes designed to address the sales goals, 

incentive plans, and managerial pressure that caused the misconduct.  In 2013, the Community 

Bank under Tolstedt’s leadership fired more than a thousand employees for sales misconduct, as it 

had during the prior year. 

C. Tolstedt Manages the Community Bank’s Reported Cross-Sell Metric 

33. Tolstedt was in charge of, and closely involved in, the decision-making for the 

Community Bank’s calculation of its cross-sell metric.   

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34. Accounts and financial products opened without customer consent or pursuant to 

gaming practices were included in the Community Bank cross-sell metric until the point when 

such accounts were eventually closed—for some products, months or years later—for lack of use.  

Similarly, accounts and financial products that were never or seldom used by customers were 

also included by the Company in the Community Bank cross-sell metric until such accounts 

were eventually closed for lack of use, at which time those accounts were removed from the 

cross-sell metric.   

35. Indeed, unauthorized and other unused accounts were frequently counted in the 

cross-sell metric for months or years before they were removed.  In some cases (like checking 

or savings accounts), the unused accounts were closed relatively quickly (usually within 90 

days if unfunded).  But for other products such as debit cards, which was the largest product 

category included in the cross-sell metric, the unused accounts remained open without activity 

for up to four years.  

36. Tolstedt exercised approval over decisions regarding potential changes that would 

impact the cross-sell metric, such as decisions regarding when to “purge” or remove groups of 

products from the metric.  For instance, with Tolstedt’s knowledge and approval, purges of unused 

accounts were at times delayed in order to minimize the impact on the reported cross-sell metric, 

including by pairing the purges with other events that caused an increase in cross-sell.  

37. Thus, in late 2013, Tolstedt acknowledged to senior management at Wells Fargo 

that measuring and managing cross-sell appropriately would require ensuring that low-quality sales 

of products that customers did not use or value were either automatically purged out of the metric, 

or “never get into the count.”  She explained that such controls were important to ensure that the 

cross-sell metric remained meaningful to shareholders.  But, as Tolstedt was aware, the 

Community Bank did not regularly purge low-quality products from the metric or otherwise 

prevent significant amounts of those products from being included in the count. 

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D. Media Reports of Sales Misconduct Lead to Scrutiny and Lower Sales 

38. In October 2013, the Los Angeles Times reported that Wells Fargo had fired 

approximately 30 employees in the Los Angeles area for sales-related misconduct.  In forwarding 

the article to the CEO, Tolstedt alerted him:  “This is not a good article.”   

39. The Los Angeles Times continued its reporting in a December 2013 article that 

stated that its sources included “28 former and seven current Wells Fargo employees who worked 

at bank branches in nine states, including California,” and internal bank documents.  The Times 

detailed practices such as bankers ordering credit cards without customers’ permission, forging 

client signatures, and begging their own family members to open “ghost accounts.”  

40. Shortly after the first article was published, Tolstedt participated in a meeting with 

senior officers of Wells Fargo and other leadership of the Community Bank in which they 

discussed the estimated number of employees who were fired by the Community Bank for sales 

misconduct, which was approximately 1,000 or more annually or roughly one percent of the 

number of bankers.  As Tolstedt was aware, the number of employees dismissed annually did not 

account for the far larger number of persons who were investigated for such practices but not fired, 

either because they resigned while under investigation or were disciplined less harshly.   

41. The Los Angeles Times reporting affected the Community Bank, as it saw a 

significant decrease in sales immediately after the December 2013 article.  Employees of the 

Community Bank closely watched sales data over the ensuing quarter, in order to report to the 

information to Tolstedt.    

E. Tolstedt Affirms Misleading Cross-Sell Claims in Public Statements 

Tolstedt Misleadingly Describes Cross-Sell at 2014 Investor Day Conference 

42. During the first quarter of 2014, Tolstedt learned that growth in the cross-sell 

metric had “flattened” due to a decrease in sales of new products, which was itself due in large part 

to the chilling effect of the revelations by the Los Angeles Times.   

43. The decline in sales was linked to the attention within Wells Fargo to the media 

reports, which led to pressure from the board of directors, the Corporate Risk Officer, and from the 

bank’s primary regulator (the OCC) to curb bad behavior resulting from aggressive sales goals.  By 

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the beginning of May 2014, Tolstedt was made aware of data that showed that the cross-sell metric 

appeared to be declining.    

44. Tolstedt discussed this phenomenon repeatedly with her top deputies during the 

first quarter of 2014.  For instance, Tolstedt learned from her staff that the number of sales had 

decreased, but that a measurable portion of the decline was due to improvements in sales quality; 

in other words, fewer accounts showed signs of so-called low quality—lack of authorization or 

use.  Her staff recommended that the sales plan reflect these lower numbers to comport with this 

new reality.   

45. Further, Tolstedt and her staff discussed during the first few months of 2014 the 

fact that the slowdown in growth in the cross-sell metric presented a challenge in communicating 

the cross-sell strategy to investors.  Tolstedt asked her team to estimate what percentage of reduced 

sales were “empty” or not used by the customer, so that they could understand the effect on the 

cross-sell metric.  

46. By May 2014, Tolstedt was completing preparations for the important “Investor 

Day” Conference that Wells Fargo hosted every other year.  The 2014 Conference was scheduled 

to occur over several hours on May 20, 2014, in San Francisco, and was expected to be attended by 

numerous large investors, as well as by securities industry analysts who followed Wells Fargo’s 

stock closely and who wrote about Wells Fargo in their communications with their own investor 

clients.  The highest levels of management at Wells Fargo—including the CEO, the Chief 

Financial Officer, the Chief Operating Officer, and Tolstedt as head of Community Banking—

were slated to provide details for the attendees regarding the Company’s achievements over the 

prior two years and its strategies going forward. 

47. In preparing for the 2014 Investor Day Conference, in May 2014, Tolstedt provided 

senior officers at Wells Fargo with the slide presentation she intended to use to present on behalf of 

the Community Bank during the Investor Day Conference.  The slides reiterated that cross-selling 

to customers remained a core business strategy, and emphasized that the purpose of cross-selling 

was to satisfy customers’ “needs.”  The slides also touted “growth” in the cross-sell metric, using 

data over a two-year period.   

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48. In contrast to the emphasis on customer “needs” in the slides, and the claims to 

recent growth in the cross-sell metric, Tolstedt revealed to Wells Fargo senior officers that she had 

concluded that a very different phenomenon was influencing the cross-sell metric.  According to 

Tolstedt, she was managing how her team talked about cross-sell, because she saw that “our cross-

sell will flatten” and that it “could decrease some.”  Further, in forwarding the slides to others in 

management, Tolstedt described that the flattening and likely decrease in the metric was due to the 

fact that sales levels were down due to changes the bank made to address poor sales quality, 

alluding to the firings in Southern California.  Tolstedt also described the fact that the metric 

included products that were not used, or for which usage and profits were “low,” but she assured 

the management team that those products were “rolling off” the metric.  Tolstedt reiterated that the 

Community Bank’s “cross-sell could weaken some” and estimated that it would take a year to 

eighteen months to “get through” the trend.   

49. Finally, as Tolstedt acknowledged in her internal communications within Wells 

Fargo, the slide presentation did not capture the known causes for the weakening and likely decline 

in the cross-sell metric.   

50. A few days prior to the Investor Day Conference, Tolstedt informed her staff that 

she expected a question about the cross-sell metric and why “the pace of growth appears to be 

slipping” from an analyst who followed Wells Fargo’s stock.  At the May 20, 2014 Investor Day 

Conference, the analyst did ask Tolstedt, as expected, to explain the apparent slowdown in growth 

of the cross-sell metric, including the observation that “[i]t looks like the pace of cross-sell from 

2012 to 2013 from 6.1 products to 6.2 products, that’s the slowest percentage increase on a core 

basis in a couple decades.”   

51. In response, Tolstedt stated: 
 

When you think about cross-sell, there’s many things that influence our 
cross-sell rate over time. Over different cycles we have seen the pace of 
growth change, and that is really to be expected. Let me give you a couple 
of examples that can impact your cross-sell. 
 
CDs. In times where our customers choose that they would rather have their 
money in a savings account at Wells Fargo, they will close the CD. That 
will impact our cross-sell rate. Home equity loans. There’s times at which 
they will refinance their first, fold in their home equity loan, and that will 

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impact our cross-sell. All really good for Wells Fargo and will change over 
time. 
 
Another impact of cross-sell over time can easily be, if our household 
growth is faster, we will bring in a new household at three or four products 
where our existing base as it sits. None of this is unexpected; none of this is 
bad news. In fact, we are very excited about our cross-sell.  

 
When you think about the seventh and eighth product being twice as more 
profitable than the first four and the fact that our cross-sell rate will grow a 
little bit slower than certainly our profit per household will be. We are 
bullish on cross-sell, we are confident on cross-sell, and we still believe that 
we can get to an eight cross-sell.  
 

52. Tolstedt’s response to the question posed by the analyst was materially misleading.  

Though Tolstedt chose in responding to offer reasons why the cross-sell metric could slow, 

entirely absent from her response were the reasons that she understood that growth in the metric 

had slowed: namely, the efforts by Wells Fargo to address sales misconduct and the reactions by 

Wells Fargo bankers to those efforts.  Providing a truthful answer to investors would have linked 

the effects of the sales practices misconduct to the cross-sell metric. 

53. Tolstedt further touted the cross-sell metric as purportedly showing growth and 

indicating future revenue growth during the Investor Day Conference, despite the misgivings she 

had, which she had shared internally at Wells Fargo, about the slowdown in its growth.  In her 

prepared remarks she thus stated: “The beneficial cycle of cross-sell continues.  The more products 

the customers have with us, the better deal and greater value we can provide.  The more business 

they do with us, the longer they stay with us, giving us more opportunities to provide products they 

might need over a lifetime.  Our retail bank cross-sell is now at 6.17 products, up from two years 

ago 5.98, and at the time of the merger [with Wachovia in January 2009] we were at 5.2.  Our 

long-term goal continues to be an average cross-sell of 8 and achieving this goal will come with 

higher household purchase rates and growth in profitability.” 

54. From Tolstedt’s slanted presentation, investors were led to believe that Wells Fargo 

was executing its cross-selling strategy as intended, and that its results were strong.  Indeed, the 

analyst who specifically asked about the cross-sell strategy and metric issued a report the following 

day that reiterated:  “The main revenue opportunity in the Community Bank continues to be cross-

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selling,” and further summarized points raised by Tolstedt; of course, no mention was made of the 

effects of sales misconduct on the metric.   

Tolstedt Provides False Sub-Certification of Second Quarter 2014 Report 

55. After the Investor Day Conference, Tolstedt continued to speak internally at the 

bank about her concerns regarding the decline in the cross-sell metric, including her concern that 

investors might conclude the decline was related to the sales misconduct issues.  Through the 

summer months in 2014, Tolstedt worked closely with her staff to remain apprised of the level of 

the metric.   

56. During this period, Wells Fargo reported no growth in the cross-sell metric in its 

public filings.  Thus, on August 6, 2014, Wells Fargo described in its quarterly report filed on 

Form 10-Q for the second quarter (ended June 30, 2014) that the Community Bank cross-sell 

metric was 6.17 as of May 2014.  The reported 6.17 figure was the same figure that Wells Fargo 

had reported for the Community Bank’s cross-sell metric during its first quarter (ended March 31, 

2014).   

57. Tolstedt was well aware of the reported cross-sell metric in Wells Fargo’s second 

quarter 2014 Form 10-Q, as she closely reviewed the disclosures in the Form 10-Q before it was 

filed with the SEC.  Indeed, Wells Fargo employed a process each quarter in which Tolstedt was 

required to review and provide input to ensure the accuracy of the information reported about the 

Community Bank.  To indicate her completed review and approval of the information as presented, 

Tolstedt was also required to certify to the accuracy of the information.  

58. To do so, each quarter, Tolstedt was supplied a draft of the quarterly or annual 

report, and specific information about the sections of the report that she needed to review, and if 

necessary, to edit.  Tolstedt was informed that she was provided the draft report in order to affirm 

the accuracy of the information and to make any needed changes.  Based on her experience with 

dozens of quarterly and annual reports, by 2014 Tolstedt knew that her sub-certification of the 

accuracy of a draft report would result in the dissemination to investors of the information about 

the Community Bank.  Thus, in or around late July 2014, Tolstedt received from the Community 

Bank’s controller’s office the draft quarterly report for the second quarter of 2014 (ended June 30, 

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2014).  In addition to a printed copy of the draft quarterly report, Tolstedt was also provided by 

email an outline of the areas of particular interest to her, and areas that had changed from prior 

reporting periods.   

59. Tolstedt reviewed closely the portions of the second quarter 2014 report on Form 

10-Q that related to the Community Bank, including the cross-sell metric.  For instance, during 

discussions at the end of July 2014 with the Community Bank’s controller, Tolstedt asked 

questions about Wells Fargo’s disclosures regarding the cross-sell metric and strategy.  Tolstedt 

stated as well:  “Reminder:  We need to watch how we use cross-sell.  Right now, we have some 

year over year growth but we are flat linked quarter.”   

60. In early August 2014, Tolstedt received the revised draft of the quarterly report for 

the second quarter 2014.  On or about August 6, 2014, Tolstedt made a sub-certification in writing 

to the CEO and to the CFO that “to [her] knowledge based on [her] position with the [Community 

Bank], the financial and other information provided by the [Community Bank] and recorded in the 

General Ledger, and the financial and other disclosures separately provided by the Group for the 

[second quarterly] Report do not contain any untrue statement of a material fact or omit to state a 

material fact necessary to make the statements made, in light of the circumstances under which 

such statements were made, not misleading for the periods covered by the Report.”  In her sub-

certification, Tolstedt stated that she understood that, in signing the second quarter 2014 report on 

Form 10-Q, the CEO and CFO were relying on her certifications.  

61. Tolstedt further affirmed that, “to [her] knowledge based on [her] review of the 

[second quarterly] Report Draft,” the filing did not contain any material misstatements or 

omissions.  Tolstedt stated in the sub-certification that she understood that “information is 

‘material’ if an investor would consider it important in making an investment decision about the 

Company’s securities or if it would significantly alter the total mix of information available in the 

marketplace.”   

62. Notwithstanding Tolstedt’s sub-certification, Wells Fargo’s second quarter 2014 

report on Form 10-Q (for the period ended June 30, 2014), which was filed with the SEC on or 

around August 6, 2014, was materially false and misleading.  In particular, the report included 

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several statements, as detailed above, describing the Community Bank’s cross-sell strategy as 

purportedly selling to customers products they needed and wanted, and the metric as purportedly 

measuring the success of such a needs-based strategy.  In reality, as Tolstedt knew, the reported 

cross-sell metric of 6.17 as of May 2014 was inflated by accounts and products that resulted from 

sales misconduct and were not needed or wanted by customers, but were unauthorized or unused.  

63. The misleading statements and omissions of fact in Wells Fargo’s second quarter 

2014 report on Form 10-Q were material.  The report materially misstated to investors the extent to 

which the inclusion of unused, unneeded, and unauthorized accounts in the cross-sell metric had 

inflated the reported number.  The report also created the materially false and misleading 

impression that Wells Fargo’s strategy was to cross-sell products that customers valued and used, 

and it omitted the material fact that the strategy resulted in the inclusion of a significant number of 

unused, unneeded, and unauthorized accounts.      

Tolstedt Provides False Sub-Certification of Third Quarter 2014 Report  

64. Despite the materially inflated cross-sell metric reported by Wells Fargo, Tolstedt 

remained concerned that the metric reported quarterly would not be well received by investors, 

because of the perceived “flattening” in the growth of the metric.  Indeed, as the third quarter 2014 

was winding up, on or around September 30, 2014, Tolstedt understood that the Community Bank 

would report, for the first time, a decrease to the cross-sell metric for the third quarter.  While the 

reported metric for the second quarter 2014 was 6.17, the metric for the third quarter 2014 was 

6.15.   

65. Wells Fargo thus reported in its third quarterly report filed on Form 10-Q (for the 

period ended September 30, 2014), which was filed with the SEC on or about November 5, 2014:  

“We continued our focus on meeting customers’ financial needs and creating long-term value for 

shareholders. Compared with a year ago:  . . . we continued to maintain our solid customer 

relationships across our company with Retail Banking cross-sell of 6.15 products per household” 

as of August 2014.  

66. Wells Fargo’s third quarter 2014 report on Form 10-Q was materially false and 

misleading, as it presented the cross-sell metric of 6.15 as purportedly measuring the success of a 

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needs-based strategy, when in reality, as Tolstedt knew, the metric was significantly inflated by 

accounts and products that were the results of sales misconduct and were not needed or wanted by 

customers, but were unauthorized or unused. 

67. As Tolstedt had done for the prior quarter, she closely reviewed the draft third 

quarter 2014 report on Form 10-Q, including the representations about the Community Bank’s 

cross-sell strategy and its reported metric, described above, before it was filed.  For instance, 

Tolstedt asked the Community Bank’s controller questions about what disclosures Wells Fargo 

had made about its cross-sell metric, and Tolstedt questioned whether Wells Fargo should discuss 

the metric differently going forward in light of the fact that Tolstedt expected that the metric would 

no longer grow over the coming quarters.  The Community Bank’s controller supplied Tolstedt 

with the disclosure that Wells Fargo had incorporated into the quarterly report and noted that 

Tolstedt had the opportunity to review and revisit the disclosures made.  Based on her experience, 

Tolstedt knew that her sub-certification of the accuracy of the draft report would result in the 

dissemination to investors of the information about the Community Bank in the report to investors. 

68. Tolstedt nevertheless confirmed the accuracy of the third quarter 2014 report.  On 

or about November 5, 2014, she provided her sub-certification that, “to [her] knowledge based on 

[her] review of the [third quarterly] Report Draft,” the filing did not contain any material 

misstatements or omissions.  Indeed, Tolstedt further affirmed to the CEO and to the CFO that the 

financial and other disclosures provided by the Community Bank for the third quarter 2014 report 

on Form 10-Q did not contain any untrue statement of a material fact or omit to state a material 

fact necessary to make the statements made, in light of the circumstances in which the statements 

were made, not misleading. 

69. The misleading statements and omissions of fact in Wells Fargo’s third quarter 

2014 report filed with the SEC on Form 10-Q were material.  The report materially misstated to 

investors the extent to which the inclusion of unused, unneeded, and unauthorized accounts in the 

cross-sell metric had inflated the reported number.  The report also created the materially false and 

misleading impression that Wells Fargo’s strategy was to cross-sell products that customers valued 

and used, and it omitted the material fact that the strategy resulted in the inclusion of a significant 

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number of unused, unneeded, and unauthorized accounts. 

Community Bank Confirms Misleading Metric in 2014 Annual Report 

70. Despite Tolstedt’s consideration of potential changes to the reported cross-sell 

metric in 2014, Tolstedt concluded the Community Bank would not change how cross-sell was 

reported.  Then, on or around December 29, 2014, Wells Fargo received an inquiry from the 

Securities and Exchange Commission’s Division of Corporation Finance asking:  
 

In your quarterly reports, as well as your annual reports and in earnings calls, you 
discuss the fact that your cross-sell program is a key element that management believes 
will help Wells Fargo meet its strategic goals.  Please provide us with an explanation of 
the methodology you use to calculate the products per household and products per 
customer metrics, as discussed on page 3, and on pages 44 and 45 of your 2013 Annual 
Report.  Also, please tell us to what extent your methodology for calculating the metric 
has changed over the last five years.  

71. Tolstedt received the letter from Wells Fargo’s Controller, to whom it had been 

addressed, shortly after it arrived. The next morning she sent it to two trusted lieutenants of hers, 

with the subject line: “urgent!” and began her message: “FOR YOUR EYES ONLY. PLEASE DO 

NOT FORWARD. Confidential.” Tolstedt directed her team to help with responding to the query.  

Over the next two weeks, they prepared a response to the SEC staff on behalf of Wells Fargo, 

dated January 12, 2015, which stated: 
 
Our cross-sell strategy is to increase the number of products our customers utilize by 
offering them all of the financial products they need… We report cross-sell metrics for 
our Community Banking and Wealth, Brokerage and Retirement (WBR) operating 
segments based on the average number of retail products used per retail banking 
household.  For Community Banking the cross-sell metric represents the relationship of 
all retail products used by customers in retail banking households. (Emphasis added.)  
 

72. The same language in the response was also included in Wells Fargo’s 2014 

Annual Report filed with SEC with its Form 10-K.  The 2014 Annual Report thus represented that 

the cross-sell metric for the Community Bank is “based on the average number of retail products 

used per retail banking household.” (Emphasis added.)   

73. Similar to the process Tolstedt followed for the quarterly reports filed earlier in the 

year, in January 2015, Tolstedt was provided by the Community Bank controller the draft 2014 

Annual Report with specific reference to the portions of the report that addressed the Community 

Bank.  As she had done for the quarterly reports, Tolstedt reviewed the 2014 Annual Report 

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closely.  Based on her experience, Tolstedt knew that her sub-certification of the accuracy of the 

draft report would result in the dissemination to investors of the information about the Community 

Bank. 

74. On or about February 25, 2015, Tolstedt provided her sub-certification to the CEO 

and CFO, stating that she had reviewed the 2014 Annual Report and that, “to [her] knowledge 

based on [her] position with the [Community Bank], the financial and other information provided 

by the [Community Bank] and recorded in the General Ledger, and the financial and other 

disclosures separately provided by the Group for the Report do not contain any untrue statement of 

a material fact or omit to state a material fact necessary to make the statements made, in light of the 

circumstances under which such statements were made, not misleading for the periods covered by 

the Report.”   

75. Wells Fargo filed its 2014 Annual Report and Form 10-K with the SEC on or 

around February 25, 2015.  In it, Wells Fargo again informed investors that the Company’s cross-

sell strategy was an important strategy and that the cross-sell metric was monitored to determine 

whether Wells Fargo was satisfying its customers’ needs. Wells Fargo thus described its strategy: 

“Cross-sell Our cross-sell strategy is to increase the number of products our customers use by 

offering them all of the financial products that satisfy their financial needs.”  (Emphasis added.) 

The Annual Report further stated: “For Community Banking the cross-sell metric represents the 

relationship of all retail products used by customers in retail banking households.” (Emphasis 

added.)  

76. Wells Fargo also stated in the 2014 Annual Report: “Our retail banking household 

cross-sell was 6.17 products per household in November 2014, up from 6.16 in November 2013 

and 6.05 in November 2012. . . . We believe there is more opportunity for cross-sell as we continue 

to earn more business from our customers.” 

77. Wells Fargo’s 2014 Annual Report was materially false and misleading.  In 

particular, the report included the misleading statements, including those set forth above, that 

described the Community Bank’s cross-sell strategy as one that involved selling to customers 

products they needed and wanted.  Wells Fargo further elaborated, as described above, how its 

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Community Bank cross-sell metric purportedly measured the success of this strategy by measuring 

the number of supposedly revenue-generating accounts and products per customer household, 

which were “used.”  In reality, as Tolstedt knew, the reported cross-sell metric of 6.17 was 

significantly inflated by accounts and products that resulted from sales misconduct and were not 

needed or wanted or used by customers, but were unauthorized or unused. 

78. The misleading statements and omissions of fact in Wells Fargo’s 2014 Annual 

Report filed with the SEC with its Form 10-K were material.  The report materially misstated to 

investors the extent to which the inclusion of unused, unneeded, and unauthorized accounts in the 

cross-sell metric had inflated the reported number.  The report also created the materially false and 

misleading impression that Wells Fargo’s strategy was to cross-sell products that customers valued 

and used, and it omitted the material fact that the strategy resulted in the inclusion of a significant 

number of unused, unneeded, and unauthorized accounts. 

Tolstedt Provides False Sub-Certifications, While Minimizing Sales Fraud to Board  

79. During the first half of 2015, Tolstedt continued to ask members of her team whom 

she supervised in the Community Bank to find more information regarding the flattening and 

decline of the cross-sell metric.  Her team recognized, and discussed with her, that the metric had 

stalled due to the significant level of unused accounts that had been sold in the past and that were 

increasingly falling out of the metric and not being replaced by new sales; those unused accounts 

that remained did not represent new opportunities for revenue or for further sales.  While Tolstedt 

had many frank conversations with her own staff about how the sales misconduct continued to 

affect the Community Bank’s reported cross-sell metric, Tolstedt’s discussions outside of the 

Community Bank—including to members of the board of directors—were less forthcoming.   

80. In particular, during the spring of 2015, the Risk Committee of the Wells Fargo 

board of directors sought to learn from Tolstedt the extent of the sales fraud and sales integrity 

issues at the Community Bank.  The board’s Risk Committee was ultimately responsible for 

overseeing the many sources of risk to the bank, including reputational and operational risks.  The 

board’s Risk Committee was separate and apart from other risk management functions, including 

an enterprise-wide risk committee, and the risk function of the Community Bank.  The Chief Risk 

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Officer, who reported to the board’s Risk Committee, coordinated with Tolstedt to obtain her 

appearance at a meeting of the board’s Risk Committee on or around April 28, 2015. 

81. During the April 28, 2015 meeting, the Chairman of the Risk Committee did not 

believe that Tolstedt answered the relevant questions to the committee’s satisfaction.  As Tolstedt 

had been informed prior to the meeting, the committee sought information about the extent of the 

sales misconduct problem that had begun to surface in 2013, including the extent and causes of the 

problem, and any efforts to address the problems. Tolstedt’s presentation failed to address the 

substance and scope of the sales misconduct, including the types of misconduct that had taken 

place and the number of accounts likely affected.  As a result, the Chairman requested that Tolstedt 

make a further presentation at the next meeting of the board’s Risk Committee; he also spoke to 

the CEO and Chief Risk Officer about his dissatisfaction with Tolstedt’s presentation.   

82. One week later, on or about May 5, 2015, Wells Fargo learned that the City of Los 

Angeles had sued the Company for harm it claimed Wells Fargo had caused customers related to 

the sales integrity issues.  As a result of the information received from Tolstedt and the Community 

Bank, members of the board of directors thought the lawsuit came out of the blue, as it presented a 

sales integrity problem well beyond anything they had been made aware of.  

83. Tolstedt was informed by the CEO that her further presentation to the board’s Risk 

Committee regarding the sales integrity issues was expected to be the first order of business in a 

meeting on May 19, 2015.  Tolstedt provided a draft of the presentation that she intended to share 

during the meeting to the CEO a few days before the meeting.  The CEO told her that the Risk 

Committee would want more supporting information, including the number of Wells Fargo 

employees terminated for sales practices violations in the past 12 months versus prior periods; the 

percentage of the sales staff that terminated for bad behavior; how Wells Fargo would make sure it 

made impacted customers “whole”; and how many accounts were opened or products sold in 2013, 

2014, and the beginning of 2015 without the knowledge of the customers.  The CEO was not 

available to attend the meeting with Tolstedt.   

84. Despite the specific information that the CEO informed Tolstedt the Risk 

Committee wanted to know, Tolstedt’s presentation to the Risk Committee in May 2015 lacked 

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such specifics and focused instead on a subset of conduct.  For instance, Tolstedt’s written 

materials described a particular effort to identify certain sales misconduct violations, which had 

resulted in a total of approximately 230 terminations of employees.  Not described in those 

materials were the more than 1,000 employees who were terminated annually for sales integrity 

violations.  Tolstedt also told the Committee that the incentives used by the Community Bank were 

not the cause of the problems.  Despite Tolstedt’s selective presentation, members of the board 

considered the sales integrity issues a serious risk to the bank.  Accordingly, the Committee hired a 

consultant to attempt to determine the scope of the sales problems that they did not learn from 

Tolstedt. 

85. Just as she minimized the sales integrity problems to the board members, Tolstedt 

continued to provide misleading sub-certifications to the CEO and CFO for the first two quarters 

of 2015.  Prior to Wells Fargo filing the Forms 10-Q for the first and second quarters of 2015, 

Tolstedt closely reviewed drafts of each of the reports, including the representations about the 

Community Bank’s cross-sell strategy and its reported metric.  Based on her experience, Tolstedt 

knew that her sub-certification of the accuracy of the draft report would result in the dissemination 

to investors of the information about the Community Bank in the report to investors. 

86. Nevertheless, for each report, Tolstedt confirmed the accuracy, sub-certifying that, 

“to [her] knowledge based on [her] review of the Report Draft,” the Form 10-Q did not contain any 

material misstatements or omissions.  Tolstedt provided her further sub-certification that the 

financial and other disclosures provided by the Community Bank for both the first and second 

quarter 2015 reports did not contain any untrue statements of material fact or omit to state material 

facts necessary to make the statements made, in light of the circumstances in which the statements 

were made, not misleading.  Both sub-certifications for the first and second quarters—dated, 

respectively, May 6, 2015 and August 5, 2015—were thus false and misleading when made. 

87. Thus, on or about May 6, 2015, Wells Fargo filed its first quarter 2015 report on 

Form 10-Q (for the period ended March 31, 2015) with the SEC in which it claimed, among other 

things, that its “retail banking household cross-sell was 6.13 products per household in February 

2015,” and further reiterated that its “approach is needs-based.”   

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88. Similarly, Wells Fargo filed its second quarter 2015 report on Form 10-Q (for the 

period ended June 30, 2015) with the SEC on or about August 5, 2015, in which it stated, among 

other things, that its cross-sell strategy was “needs based,” and also reported “retail banking 

household cross-sell was 6.13 products per household in May 2015.”   

89. Wells Fargo’s first and second quarter 2015 reports on Forms 10-Q were materially 

false and misleading, as each presented the cross-sell metric of 6.13 as purportedly measuring the 

success of a “needs-based” strategy; in reality, the metric was significantly inflated by accounts 

and products that resulted from sales misconduct and were not needed or wanted by customers, but 

were unauthorized or unused.  

90. The misleading statements and omissions of fact in Wells Fargo’s first and second 

quarter 2015 reports filed with the SEC on Forms 10-Q were material.  The reports both materially 

misstated to investors the extent to which the inclusion of unused, unneeded, and unauthorized 

accounts in the cross-sell metric had inflated the reported number.  The reports both also created 

the materially false and misleading impression that Wells Fargo’s strategy was to cross-sell 

products that customers valued and used, and both reports omitted the material fact that the 

strategy resulted in the inclusion of a significant number of unused, unneeded, and unauthorized 

accounts.               

Tolstedt Internally Proposes New Metric While Publicly Affirming Inflated Metric 

91. During 2015, Tolstedt tasked her own team to identify other ways to measure and 

present the cross-sell metric.  Tolstedt and her deputies were concerned that “idle” products and 

“inactive” accounts were the cause of the slow and declining growth in the reported cross-sell 

metric.  

92. Thus, in July and August 2015, Tolstedt’s team shared with her analyses they had 

developed to look at the inputs to the cross-sell metric that distinguished active, or used, accounts 

from inactive, or unused, accounts.  They further identified that, because products such as debit 

cards could remain in the metric for years with little or no activity, the reported metric included 

many inactive accounts from periods where the sales misconduct was high. 

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93. As Tolstedt and her team were completing their analyses for presentation to the 

Company’s senior management, Tolstedt was again asked to make a presentation to the Risk 

Committee of the board of directors regarding sales misconduct at the Community Bank.  The Risk 

Committee meeting was scheduled in conjunction with meetings of the Wells Fargo full board of 

directors meetings, which took place on October 26-27, 2015.   

94. As Tolstedt was informed, the Risk Committee also heard a report during the 

October 25 meeting from the outside consulting firm that had been retained to review the sales 

misconduct issues.  The consulting firm reported to Wells Fargo’s board the weaknesses that 

needed to be addressed by the Company to manage the ongoing adverse impact from sales 

misconduct, and recommended, among other measures, that bankers be rewarded based on 

whether accounts were used, rather than on the number of products sold.  

95. Though Tolstedt presented on many of the same issues as the outside consulting 

firm during the October 2015 meeting, she denied that structural issues were a cause of the 

misconduct, and Tolstedt did not describe to the board the analyses regarding active and inactive 

accounts.  The Chairman of the Risk Committee found Tolstedt’s presentation inadequate, and in a 

subsequent meeting with the CEO, he and another board member recommended that Tolstedt be 

replaced as head of the Community Bank. 

96. During the final months of 2015, Tolstedt’s team shared with her the results of their 

analyses regarding the cross-sell metric.  In November 2015, the team presented to Tolstedt a new 

cross-sell metric that only included active accounts.  Their research concluded that more than 10 

percent of household accounts that had been included in the reported cross-sell metric were 

inactive within a six-month period, and that more than half of retail bank households held at least 

one inactive account.  Their work demonstrated the sources of the “inactive” or “idle” accounts as 

well; for instance, debit cards were sold in high volume and thus accounted for 29 percent of total 

accounts, but 30 percent of the debit cards remained inactive in any given month. 

97. Tolstedt and her team presented their findings in January 2016 to the CEO and the 

COO, recommending the new metric—which they dubbed “active cross-sell”—be ready for 

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presentation publicly by the time of Wells Fargo’s 2016 Investor Day conference later in the 

spring.   

98. As Tolstedt’s presentation explained, the Community Bank should make two 

changes to its reported cross-sell metric.  One change would redefine the measured “household,” 

which change, on its own, would have the effect of making the cross-sell metric a larger number.  

The second, and more significant change, was to include in the number of products counted only 

those products that customers actively used, which change would have the effect of making the 

cross-sell metric smaller.  To illustrate, the presentation used the data that had been included for 

the reported cross-sell metric in the third quarter 2015 Form 10-Q, and compared the reported 

cross-sell metric with the newly-proposed metric:  “Current [Cross-sell]:  6.13     Active Cross-sell 

5.17.”  

99. Tolstedt and her team thus demonstrated that by restricting the cross-sell metric to 

products actually “used,” the number changed substantially.  Tolstedt and her team also expected 

that, unlike the then-reported cross-sell metric that was laden with inactive accounts, the “active 

cross-sell” metric would likely show growth much sooner.   

100. At the same time that Tolstedt was discussing—first with her own team, and then 

with the larger management team—the disparity between the reported cross-sell metric and the 

number of accounts that were actually used, Tolstedt was called upon to review and sub-certify 

Wells Fargo’s third quarter 2015 report on Form 10-Q, and then Wells Fargo’s year-end 2015 

Annual Report.  Based on her experience, Tolstedt knew that her sub-certification of the accuracy 

of the draft report would result in the dissemination to investors of the information about the 

Community Bank in the report to investors.  

101. For instance, during her review of the draft third quarter 2015 report, Tolstedt 

was alerted to changes that had been made to the cross-sell disclosures in the prior quarter Form 

10-Q, which stated for the first time that some customers would need “more products” and some 

“fewer.”  Although minor edits were made to the third quarter 2015 Form 10-Q to conform the 

report to the prior revisions, Tolstedt did not revise the disclosures, either in the draft Form 10-Q or 

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in the 2015 Annual Report, to reflect the analyses about the cross-sell metric that she had directed 

her team to complete for the Community Bank.   

102. Instead, on or about November 4, 2015, Tolstedt confirmed the accuracy of the 

draft, third quarter 2015 report, and on or about February 24, 2016, Tolstedt confirmed the 

accuracy of the draft Annual Report.  For each, she provided to the CEO and the CFO her sub-

certification that, “to [her] knowledge based on [her] review of the Report Draft,” the quarterly and 

the annual reports did not contain any untrue statement of a material fact or omit to state a material 

fact necessary to make the statements made, in light of the circumstances in which the statements 

were made, not misleading.  

103. On or about November 4, 2015, Wells Fargo filed its third quarter 2015 report on 

Form 10-Q (for the period ended September 30, 2015) stating, among other things, that its “cross-

sell strategy” was “needs based,” and that the Community Bank’s “retail banking household cross-

sell was 6.13 products per household in August 2015.”  Similarly, on or about February 24, 2016, 

Wells Fargo filed with the SEC its 2015 Annual Report with its Form 10-K for the year ended 

December 31, 2015, in which it reiterated that its “approach to cross-sell is needs-based.”  Wells 

Fargo further stated that its cross-sell metric tracked the degree to which it satisfied customers’ 

needs, and reported the Community Bank’s “retail banking household cross-sell was 6.11 products 

per household in November 2015.”  

104. Wells Fargo’s third quarter 2015 Form 10-Q and its 2015 Annual Report filed 

with its Form 10-K were both materially false and misleading.  Wells Fargo claimed that the 

reported values for the Community Bank’s cross-sell metric, 6.13 and 6.11 respectively, measured 

retail products used by customers in retail banking households, when, in reality, Tolstedt knew that 

the reported cross-sell metric contained a significant amount of products that were not used by 

customers.  As Tolstedt was aware, the reported cross-sell metric was inflated by accounts and 

products that resulted from sales misconduct and were not needed or wanted by customers, but 

were unauthorized or unused. 

105. The misleading statements and omissions of fact in Wells Fargo’s third quarter 

2015 Form 10-Q and its 2015 Annual Report filed with its Form 10-K were material.  Each report 

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materially misstated to investors the extent to which the inclusion of unused, unneeded, and 

unauthorized accounts in the cross-sell metric had inflated the reported number.  Both the quarterly 

and the annual report also created the materially false and misleading impression that Wells 

Fargo’s strategy was to cross-sell products that customers valued and used, and they both omitted 

the material fact that the strategy resulted in the inclusion of a significant number of unused, 

unneeded, and unauthorized accounts. 

Tolstedt Continues to Promote Misleading Cross-Sell Metric Until Her Departure 

106. Through January and February 2016, Tolstedt and her team prepared for the 

presentation of the new, “active cross-sell” metric, to be publicly presented during Wells Fargo’s 

2016 Investor Day conference, scheduled for May 2016.  Consistent with their presentations 

internally, the first drafts of their presentation revealed that as much as 20 percent of accounts 

included in the then-reported cross-sell metric were “inactive.”  However, by the end of February, 

the team removed the explicit reference to “inactive” accounts from drafts the team circulated 

internally, due to concerns that investors would make the connection between “inactive” accounts 

and the sales misconduct that continued to have an ongoing influence on Wells Fargo’s reported 

metric.   

107. By mid-March 2016, Tolstedt’s team replaced the term “active cross-sell” with 

“dynamic cross-sell” in drafts of her expected presentation for similar reasons.  Also in early 

March 2016, Tolstedt met with a securities analyst who followed Wells Fargo’s securities closely 

and who made recommendations to investors about buying, selling, or holding the Company’s 

securities.  In the meeting, the analyst was informed that Wells Fargo would cross sell if it added 

value to customers and “only cross sell products which customers value and will use.”  Tolstedt 

failed to disclose during this meeting that many of the accounts and products included in the 

Community Bank’s cross-sell metric were not used by customers.   

108. Finally, by the time the 2016 Investor Day conference occurred, on or around 

May 24, 2016, the Community Bank’s presentation was substantially changed from the original 

conception of introducing the new, “active cross-sell” metric.  The written presentation did not 

include any reference to a new, or revised cross-sell metric.  It also did not include any 

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comparisons between “active” accounts and “inactive” accounts.  Nor did it describe information 

from which investors could discern that “active” accounts were but a portion of the accounts 

included in the reported cross-sell metric. 

109. In delivering the presentation for the Community Bank at the 2016 Investor Day 

conference, Tolstedt was again called upon to answer questions about the decline in the reported 

cross-sell metric.  In particular, one invited participant observed that the decline in the metric was 

“a bit of a change” for the Community Bank and asked whether the decline reflected either “an 

inevitable saturation” or “a need for new products.”   

110. In response, Tolstedt acknowledged that there had been “headwinds.”  However, 

she attributed the decline in the cross-sell metric to strong checking account growth, and “the 

interest rate environment” for causing some products not to be “particularly appealing to our 

customers right now.”  Tolstedt did not mention in her misleading response any of the information 

about “active” or “inactive” accounts, or the fact that the reported metric continued to decline as 

“inactive”—that is, unused, unwanted, and unauthorized products that were the result of sales 

misconduct—slowly rolled off the metric and were not replaced. 

111. Prior to, and shortly after, the 2015 Investor Day conference, Tolstedt closely 

reviewed, and affirmed the accuracy of, two additional quarterly reports on Forms 10-Q.  Based on 

her experience, Tolstedt knew that her sub-certification of the accuracy of the draft reports would 

result in the dissemination to investors of the information about the Community Bank in the 

reports to investors.  Thus, Tolstedt on or about May 4, 2016, and on or about August 3, 2016, 

provided her sub-certifications to the CEO and CFO of the first and second quarter 2016 reports, 

stating for each that, “to [her] knowledge based on [her] review of the Report Draft,” the Forms 

10-Q did not contain any untrue statement of a material fact or omit to state a material fact 

necessary to make the statements made, in light of the circumstances in which the statements were 

made, not misleading.  Accordingly, Wells Fargo filed its first quarter 2016 report on Form 10-Q 

(for the period ended March 31, 2016) with the SEC on or about May 4, 2016 and its second 

quarter 2016 report on Form 10-Q (for the period ended June 30, 2016) on or about August 3, 

2016.   

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112. In the first quarter 2016 Form 10-Q, Wells Fargo reiterated that its “cross-sell 

strategy” was “needs based,” and claimed that the Community Bank’s “retail bank household 

cross-sell was 6.09 products per household in February 2016.”  The Form 10-Q was materially 

false and misleading, as the reported metric remained significantly inflated by accounts and 

products that were the results of sales misconduct and were not needed or wanted by customers, 

but were unauthorized or unused.   

113. In the second quarter 2016 Form 10-Q, Wells Fargo again stated that its “cross-

sell strategy” was “needs based,” but Wells Fargo stated that it determined to change the 

Community Bank’s cross-sell metric “to include only those households that maintain a retail 

checking account.”  The revised cross-sell metric thus reflected the first of the two changes that 

Tolstedt had proposed in January 2016.  Yet, the second, more significant change described in 

January, which would have included only accounts actively used, was absent.  As a consequence, 

Wells Fargo reported an even higher value for the cross-sell metric:  “Our Community Banking 

cross-sell metrics, as revised for prior periods to conform to the current period presentation, were 

6.28, 6.32, 6.31, 6.37 and 6.36 as of February 2016, May 2015 and November 2015, 2014 and 

2013, respectively.”  

114. Wells Fargo’s second quarter 2016 report on Form 10-Q was materially false and 

misleading, as it presented the cross-sell metric of 6.28 as purportedly measuring the success of a 

strategy that was based on its customers’ “needs.”  In truth, the metric remained significantly 

inflated by accounts and products that were the results of sales misconduct and were not needed or 

wanted by customers, but rather unauthorized or unused. 

115. The misleading statements and omissions of fact in Wells Fargo’s first and 

second quarter 2016 Forms 10-Q filed with the SEC were material.  Each report materially 

misstated to investors the extent to which the inclusion of unused, unneeded, and unauthorized 

accounts in the cross-sell metric had inflated the reported number.  Both reports also created the 

materially false and misleading impression that Wells Fargo’s strategy was to cross-sell products 

that customers valued and used, and they both omitted the material fact that the strategy resulted in 

the inclusion of a significant number of unused, unneeded, and unauthorized accounts. 

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116. Tolstedt knew, or was reckless in not knowing, that the statements she made to 

the public and Wells Fargo’s public statements that she reviewed (and the accuracy of which she 

sub-certified) in its annual and quarterly reports filed with the SEC during 2014, 2015, and 2016, 

and in materials incorporated into those reports, regarding the Community Bank’s cross-sell 

strategy and its cross-sell metric were false and misleading.   

117. Tolstedt also knew, or was reckless in not knowing, that her conduct in publicly 

describing the Community Bank’s cross-sell strategy and its metric, and in sub-certifying the 

accuracy of the annual and quarterly reports during 2014, 2015, and 2016, operated as a fraud or 

deceit and created a false and misleading impression to Wells Fargo’s investors.  

118. At the same time Tolstedt engaged in the above acts and deceptions that sowed 

misinformation, she also sold shares in Wells Fargo, which she owned either directly or indirectly, 

and profited.  For instance, in November 2014, Tolstedt sold shares of Wells Fargo stock for more 

than $11.8 million. 

F. Wells Fargo Resolves Lawsuits; Tolstedt Departs Bank 

119. On or around July 12, 2016, Wells Fargo announced, in a release that was filed 

with the SEC, that Tolstedt was retiring at the year’s end, and would leave her position as head of 

Community Banking as of July 31, 2016.  

120. On September 8, 2016, Wells Fargo announced that it had entered into 

settlements with governmental authorities including the CFPB, the City of Los Angeles, and the 

OCC, all related to charges of sales practice misconduct within the Community Bank.  Following 

the Company’s announcement of the settlements, Wells Fargo’s stock experienced significant 

declines in the market value of its shares, decreasing its market capitalization by billions of dollars.   

121. Shortly after the announced settlements, on September 27, 2016, Wells Fargo 

announced publicly that the Company and Tolstedt had reached an agreement that she “would 

separate from employment effective September 27, 2016, that Ms. Tolstedt would not exercise any 

outstanding stock options previously awarded by the Company until the completion of the ongoing 

investigation being conducted by the Company and its Board of Directors and that, at the 

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conclusion of such investigation, the Board of Directors would have the authority to determine the 

extent to which such options will be forfeited.” 

FIRST CLAIM FOR RELIEF 

Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder 

122. The SEC re-alleges and incorporates by reference Paragraph Nos. 1 through 121. 

123. By engaging in the conduct described above, Defendant Tolstedt and Wells Fargo 

& Company, each, directly or indirectly, in connection with the purchase or sale of securities, by 

the use of means or instrumentalities of interstate commerce, or the mails, with scienter: 

(a) Employed devices, schemes, or artifices to defraud; 

(b) Made untrue statements of material fact or omitted to state material facts 

necessary in order to make the statements made, in the light of the 

circumstances under which they were made, not misleading; and 

(c) Engaged in acts, practices, or courses of business which operated or would 

operate as a fraud or deceit upon other persons, including purchasers and 

sellers of securities. 

124. By engaging in the acts and conduct alleged above, Defendant Tolstedt 

knowingly or recklessly provided substantial assistance to Wells Fargo & Company, and to other 

persons employed by the Company, in violation of Section 10(b) of the Exchange Act [15 U.S.C. 

§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], and thereby aided and abetted such 

violations, and unless restrained and enjoined, will continue to violate these provisions. 

125. By reason of the foregoing, Defendant Tolstedt violated, and unless restrained 

and enjoined will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and 

Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

SECOND CLAIM FOR RELIEF 

Violations of Sections 17(a)(1), (2), and (3) of the Securities Act 

126. The SEC re-alleges and incorporates by reference Paragraph Nos. 1 through 121. 

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127. By engaging in the conduct described above, Defendant Tolstedt, directly or 

indirectly, in the offer or sale of securities, by use of the means or instruments of transportation or 

communication in interstate commerce or by use of the mails: 

(a) With scienter, employed devices, schemes, or artifices to defraud; 

(b) Obtained money or property by means of untrue statements of material fact 

or by omitting to state a material fact necessary in order to make the 

statements made, in light of the circumstances under which they were 

made, not misleading; and 

(c) Engaged in transactions, practices, or courses of business which operated or 

would operate as a fraud or deceit upon purchasers. 

128. By reason of the foregoing, Defendant Tolstedt violated, and unless restrained 

and enjoined will continue to violate, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. 

THIRD CLAIM FOR RELIEF 

Aiding and Abetting Violations of Exchange Act Reporting Requirements 

129. The SEC re-alleges and incorporates by reference Paragraph Nos. 1 through 121. 

130. As an issuer of securities registered with the SEC, Wells Fargo was required to 

file with the SEC annual and quarterly reports, in accordance with applicable rules and regulations, 

which included information as necessary to make the statements made in the reports, in the light of 

the circumstances under which they were made not misleading.  By the conduct described above, 

Wells Fargo & Company failed to do so, in violation of Section 13(a) of the Exchange Act [15 

U.S.C. § 78m(a)], and Rules 13a-1, 13a-13, and 12b-20 thereunder [17 C.F.R. §§ 240.13a-1, 

240.13a-13, and 240.12b-20]. 

131. By engaging in the acts and conduct alleged above, Defendant Tolstedt 

knowingly or recklessly provided substantial assistance to Wells Fargo & Company, and to other 

persons employed by the Company, in violation of Section 13(a) of the Exchange Act [15 U.S.C. § 

78m(a)], and Rules 13a-1, 13a-13, and 12b-20 thereunder [17 C.F.R. §§ 240.13a-1, 240.13a-13, 

and 240.12b-20], and thereby aided and abetted such violations, and unless restrained and 

enjoined, will continue to violate these provisions.   

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FOURTH CLAIM FOR RELIEF 

Aiding and Abetting Violations of Exchange Act Books and Records Requirements 

132. The SEC re-alleges and incorporates by reference Paragraph Nos. 1 through 121. 

133. As an issuer of securities registered with the SEC, Wells Fargo & Company was 

required to make and keep books, records, and accounts, which, in reasonable detail, accurately 

and fairly reflected the transactions and disposition of the assets of the Company.  By the conduct 

described above, Wells Fargo & Company failed to do so, in violation of Section 13(b)(2)(A) of 

the Exchange Act [15 U.S.C. § 78m(b)(2)(A)]. 

134. aBy engaging in the acts and conduct alleged above, Defendant Tolstedt 

knowingly or recklessly provided substantial assistance to Wells Fargo & Company, and to other 

persons employed by the Company, in violation of Section 13(b)(2)(A) of the Exchange Act [15 

U.S.C. § 78m(b)(2)(A)], and thereby aided and abetted such violations, and unless restrained and 

enjoined, will continue to violate this provision. 

PRAYER FOR RELIEF 

WHEREFORE, the SEC respectfully requests that this Court: 

I. 

Permanently enjoin Defendant from directly or indirectly violating Sections 10(b), 13(a), 

and 13(b)(2)(A) of the Exchange Act [15 U.S.C. §§ 78j(b), 78m(a), and 78m(b)(2)(A)], and 

Rules 10b-5, 13a-1, 13a-13, and 12b-20 thereunder [17 C.F.R. §§ 240.10b-5, 240.13a-1, 240.13a-

13, and 240.12b-20], and Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. 

II. 

Issue an order requiring Defendant to pay disgorgement of ill-gotten gains or unjust 

enrichment obtained or derived from such violations, and to pay a civil monetary penalty pursuant 

to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)], and Section 21(d) of the Exchange Act 

[15 U.S.C. § 78u(d)(3)]. 

III. 

Prohibit Defendant from serving as an officer or director of any entity having a class of 

securities registered with the SEC pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l] or 

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that is required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)], 

pursuant to Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)] and Section 21(d)(2) of the 

Exchange Act [15 U.S.C. § 78u(d)(2)]. 

IV. 

Retain jurisdiction of this action in accordance with the principles of equity and the Federal 

Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees 

that may be entered, or to entertain any suitable application or motion for additional relief within 

the jurisdiction of this Court. 

V. 

Grant such other and further relief as this Court may determine to be just and necessary. 

 

Dated: November 13, 2020   Respectfully submitted, 

 

 

  /s/ Rebecca Lubens    
REBECCA LUBENS 
Attorney for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 

 

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