Hiltzik: Another sweetheart deal for a Wall Street wrongdoer

In reporting the settlement the Securities and Exchange Commission announced Friday with former Wells Fargo Chairman and Chief Executive John G. Stumpf, at least one financial website described Stumpf as being “hit” with a $2.5-million penalty.

We don’t think “hit” is the right word. We’d suggest something more like “kissed.” Or “smooched.” Or “consoled.”

John Stumpf presided over a massive fraud at Wells Fargo, turning a blind eye even as many of his underlings sent up red flares. While the fraud was going on, he collected what can be estimated at about $300 million in cash, bonuses and stock options.

Of that largesse, the bank’s chastened board of directors clawed back about $69 million after Stumpf’s dereliction of duty was revealed. Earlier this year, Stumpf agreed to pay $17.5 million to other banking regulators.

That still leaves him with well more than $200 million, reckons Stephen W. Hall, legal director at the financial watchdog group Better Markets.

“It’s not a hit, but a sweetheart deal that’s meaningless in terms of punishing and deterring a disgraceful series of violations by Wells Fargo in which Stumpf was clearly involved and knew about,” Hall told me.

In February 2017, Wells Fargo put Stumpf’s stockholdings in the company at about 2.4 million shares, worth about $123 million at the time.

Wells Fargo agreed in February to a $3-billion settlement with the SEC and Department of Justice over the violations, which involved sales staff opening millions of bogus bank accounts for customers and others in order to meet punitive sales goals.

The company said Friday, “we have commented on these historical issues in the past and have nothing to add.”

Also Monday, the SEC filed a lawsuit against Carrie L. Tolstedt, Stumpf’s immediate underling who oversaw the sales campaign, charging her with civil fraud. Tolstedt is fighting the charges.

To add insult to injury, the SEC permitted Stumpf to settle its case without admitting or denying the commission’s findings. That makes a mockery of the assertion by the SEC’s enforcement director, Stephanie Avakian, that the settlement somehow demonstrates the SEC’s determination “to hold responsible … senior executives who make false and misleading statements” in corporate disclosures.

Instead, the settlement demonstrates that “too-big-to-fail banks don’t face meaningful enforcement, punishment, deterrence,” Hall says. “You’ve got to go after the senior executives — and here they go after the senior executive but in a way that sends the wrong message, which is that you’re going to get off virtually scot-free.”

Why the SEC chose to finalize this settlement at this moment is a bit of a mystery. The wrongdoing at Wells Fargo, which was exposed in a series of articles in The Times in 2013, continued at least through 2015. Stumpf’s role was examined by regulators and congressional committees through 2016, when he was forced to resign.

Monday’s settlement has the flavor of a hasty wrap-up. Corporate accountability expert Nell Minow asked on Twitter whether it’s a “last-minute settlement before the new Biden sheriffs come to town.”

That’s an intriguing suggestion, given that some of the names being floated as SEC chairs in the new administration — among them Preet Bharara, the former U.S. attorney for the Southern District of New York and Gary Gensler, the former chair of the Commodity Futures Trading Commission — have a no-nonsense regulatory approach that probably leaves few dry seats in corporate suites on Wall Street.

To place the Stumpf settlement in context, it’s useful to recount what the SEC says he did (or didn’t do) as Wells Fargo’s boss.

Boiled down to its…