Last week there were significant developments in the legal troubles that have dogged both LendingClub and former CEO Renaud Laplanche since May, 2016. When Renaud was forced to resign as CEO back then, that triggered dual investigations from the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). Both investigations wrapped up on Friday.
These investigations have been hanging over the industry for more than two years and we have been waiting for their conclusion. So, let’s dig in to each of these settlements in turn to see what they found and what the consequences will be for those involved. For the record, I spoke with both a representative from LendingClub and with Renaud to get background for this story.
LendingClub Advisors, Renaud Laplanche and Carrie Dolan Agreed to Pay a Fine
We will start with the SEC action. In their press release the SEC made the following claims about LendingClub Advisors (LCA), now called LendingClub Asset Management, former CEO Renaud Laplanche and former CFO Carrie Dolan:
LCA and Laplanche caused one of the private funds it managed to purchase interests in certain loans that were at risk of going unfunded, to benefit LendingClub, not the fund, in breach of LCA’s fiduciary duty. The order also finds that LCA, Laplanche, and Dolan improperly adjusted monthly returns for this fund and other LCA-managed funds to improve the returns they reported to fund investors.
What is most interesting to me is that these are both issues we have known about for some time. In a Form 8-K LendingClub filed with the SEC on June 22, 2016 these two issues were disclosed based on LendingClub’s own internal investigation.