Wells Fargo has appeared to give two different reasons for why it failed to disclose to investors an investigation into roughly two million accounts, an issue that could play a role in whether the Securities and Exchange Commission ultimately brings charges against the bank.

Wells' then-Chief Executive John Stumpf told lawmakers last month that a $190 million settlement with regulators was not "material" to the bank.

But two weeks ago, new-CEO Tim Sloan told analysts that Wells could not disclose the existence of an investigation because it was having "conversations" with regulators and wanted "to be very careful and respectful."

Some lawyers said the difference may be part of a strategy to limit Wells' legal costs and stave off shareholder lawsuits. Companies have used the concept of confidentiality agreements with regulators to dodge disclosures, they said. But if the information about the investigation into the phony accounts was material at the time, and Wells didn't disclose it, the bank could face fraud claims.

Bloomberg News

"If it is shown that Wells failed to make a material disclosure, this could be considered an actual fraud," said Laura Anthony, a founding partner at the law firm Legal & Compliance in West Palm Beach, Fla. "Many companies make disclosures of negotiations with regulators, many companies disclose investigations by regulators and there is nothing that prevents that disclosure."

The bank maintains there is no discrepancy between the two CEOs' responses and repeated Stumpf's initial view that a disclosure was not material.

"Each quarter, we consider all available relevant and appropriate facts and circumstances in determining whether a litigation matter is material and disclosed in our public filings," said Wells spokesman Mark Folk. "Based on that review, we determined that the matter was not material."

Some argue Wells should have disclosed the investigation because it represented a significant reputational risk.

Indeed, in the wake of the scandal, Wells has seen its good reputation tarnished, and become the butt of jokes in late night. The public and political backlash to the scandal is a key reason why Stumpf was forced to retire — more evidence that the investigation should have been considered material to investors.

"It's pretty clear why they didn't disclose it, because it provided huge risks for them," said Reed Kathrein, a partner at Hagens Bergen Sobol Shapiro,a San Francisco class action litigation firm.

"Risk is not just numbers, it's not just earnings and revenue," Kathrein continued. "Their argument is that they didn't disclose [the investigation] because the dollar amount and the fraud was so small, but that's like saying we only killed one person."

Kathrein expects a large institutional investor will become the lead plaintiff in a case against Wells.

Some investors and SEC experts have pinpointed specific dates and time periods when Wells had the opportunity to alert investors about the phony accounts but didn't.

H. David Kotz, a managing director at Berkeley Research Group and a former SEC inspector general, said the SEC has brought past enforcement actions against companies for failing to disclose the mere existence of an internal investigation.

"The issue is why they didn't disclose the internal investigation which found misconduct?" said Kotz. "There was a report to the board. So there should be some specific time period [between when] they got the results of the internal investigation and the settlement was disclosed to the public."

There are reasons why a company delays filing potentially damaging information with the SEC. Some investigations result in no actions. The hope is that charges will not be filed and the information about the investigation would then never be made public.

Wells hired PricewaterhouseCoopers in August 2015 after regulators required it to get a third-party to examine the bank's account records and determine how many unauthorized accounts were opened.

But that third-party investigation only became public on Sept. 8, when Los Angeles City Attorney Mike Feuer announced the $190 million settlement. Feuer disclosed the more detailed information about PwC's internal results, which were provided by Wells, including that 1.5 million unauthorized deposit accounts and 565,000 credit card accounts had been opened, and that 5,300 employees had been fired between 2011 and 2015.

By February 2016, Wells began reimbursing customers who had been charged roughly $2.6 million in fees for accounts that were opened fraudulently by the bank, but that amount also was not considered material. The bank also missed opportunities to disclose when it reported first quarter earnings on April 14 and second quarter earnings on July 15.

Though companies have long held off from disclosing potentially damaging information to investors, they are required to do so if the information is considered "material," a term that is open to interpretation, lawyers said.

Moreover, Wells has disclosed regulatory investigations in past securities filings, including a years-long civil claim by the Justice Department over allegations that Wells originated shoddy loans insured by the Federal Housing Administration. That eventually resulted in a far larger settlement of $1.2 billion in February.

Gerald Armstrong, an activist investor, said the phony account investigation was clearly material — and the bank knows it.

"I would say their backs are against the wall," Armstrong said.

The company has made the argument that the amount of fines and restitution contemplated being paid and the proportionally small number of employees and accounts involved meant the investigation was not material.

"Some people feel differently about it after the fact, but I assure you that it was well thought about and comprehensively reviewed as part of our litigation disclosure," said John Shrewsberry, Wells' chief financial officer, in an interview with American Banker, a sister brand to Bank Investment Consultant.

In September, Stumpf told lawmakers that because the settlement represented just 3% of Wells' second-quarter profits, it was not "material." He also said the two million phony accounts represented less than 2% of Wells' total accounts and the fired 5,300 employees made up less than 1% of employees in the retail bank.

Stumpf was widely derided not being clear about what and when the board knew about the fraudulent account openings. Some lawyers suggest that the scandal has endured a long tailwind, in part, because Wells has struggled to establish a firm timeline of events, including when top managers and the board were told about the illegal sales practices and subsequent internal investigation.

Companies will often use their asset size or percentages as a guideline on whether to disclose, but "a company's board of directors has to decide what is material," Anthony said.

Politics may also play a role in the SEC's response. Three Democratic senators, led by Sen. Elizabeth Warren, D-Mass., have asked the SEC to investigate whether Wells violated three separate securities laws including signing off on inaccurate financial reporting, failing to disclose investigations of the fake accounts, and firing employees who reportedly spoke up about the wrongdoing.

"At the recent Senate Banking Committee hearing, Mr. Stumpf claimed under oath that the firing of more than 5,000 employees for creating more than two million possibly fake accounts was not "material" to investors, "Warren wrote along with Sens. Jeff Merkley, D-Colo, and Bob Menendez, D-N.J. "But Mr. Stumpf personally emphasized the company's increasing number of retail accounts and growing cross-sell ratio on quarterly earnings calls with investors and analysts, and a number of analyst reports from that period recommend purchasing Wells Fargo stock in part because of those strong numbers. Mr. Stumpf and Wells Fargo investors clearly believed that the cross-sell ratio and the number of retail accounts were material to investment decisions — and yet Mr. Stumpf did not disclose that those numbers had been inflated by millions of fraudulent accounts."

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