Former Wells Fargo Chairman and CEO John Stumpf sold $61 million worth of Wells Fargo (WFC) shares in the month prior to settling a long-running investigation that charged the bank with falsifying millions of customer accounts to boost sales and fees.
The following month, when regulators announced on Sept. 8 that they’d fined Wells Fargo $185 million for falsifying more than 2 million customer accounts to meet aggressive sales goals, the company’s stock price plunged and Stumpf was called on the carpet before Congress before finally resigning this week.
Stumpf pocketed $26 million in proceeds from that August sale — the shares in question were “incentive stock options” purchased at a discount to Wells Fargo’s current market price and then immediately sold at a profit — reflecting a small piece of the rich incentive pay that Stumpf collected during his tenure at the top of the bank.
However, the sale also raises a red flag of potential violation of insider trading rules that prohibit company insiders from profiting on stock purchases and sales based on unpublished corporate information, said Chicago securities lawyer Andrew Stoltmann.
“At minimum, the optics are horrific for Stumpf and for Wells Fargo,” Stoltmann said. “I would be shocked if the Securities and Excgange Commission doesn’t look heavily into this.”