Wells Fargo Urged to Jilt Auditor KPMG in Sales Scandal Fallout

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By Andrea Vittorio

Wells Fargo & Co. is under pressure to ditch its longtime auditor KPMG LLP because of the bank’s fake accounts scandal.

Prominent proxy adviser Glass, Lewis & Co., which generally supports a company’s choice of auditor, is urging investors to vote against KPMG at Wells Fargo’s annual meeting later this month. The firm has audited Wells Fargo’s financial records since 1931.

Wells Fargo, which is telling investors to vote for KPMG, has shaken up its management team and board in the fallout from findings that employees sought to meet aggressive sales targets by opening roughly 3.5 million potentially fake accounts. Glass Lewis said this week that switching up the bank’s auditor “is also in shareholders’ interests at this time.”

“Given the severity of the fraudulent account activity and KPMG’s prior knowledge of the incident, we believe shareholders may question whether KPMG is adequately ensuring the integrity and transparency of financial information,” the proxy adviser wrote in its voting recommendation to investors.

KPMG acknowledged in a November 2016 letter made public by lawmakers that it became aware of improper sales practices but said key controls over financial reporting weren’t implicated and the impact wasn’t financially significant. The firm, which declined to comment on Glass Lewis’s recommendation, got backing from more than 96 percent of shareholders voting at Wells Fargo’s meeting last year.

Wells Fargo also declined to comment. The bank isn’t required to seek shareholder endorsement of its auditor. But the board’s audit committee would weigh a vote of no-confidence in deciding whether to keep KPMG for 2019, Wells Fargo said in the notice for its April 24 meeting.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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