Marketplace lender LendingClub is slashing 12% of its workforce to offset declining loan originations, just as it revealed more inappropriate practices involving its former CEO.
The San Francisco-based peer-to-peer lender on Tuesday said that it would cut 179 positions due to lower loan volumes and “recognizing that fully restoring investor confidence may take time,” after CEO Renaud Laplanche was removed last month over financial irregularities at the company. As a result of the cuts, LendingClub will take a $3 million charge in the second quarter.
In addition, the company expects to record between $15 million and $20 million of additional expenses related to employee retention, employee severance, advisory relationships, board review, remediation, and due diligence activities. The company also forecasts a goodwill writedown of between $20 million and $40 million related to slower growth expectations for Springstone, a medical care lender.
LendingClub’s board also named Scott Sanborn as its chief executive and president, replacing Laplanche. Hans Morris, who had assumed the temporary role of executive chairman, has assumed the role of board chairman.
“Scott and the management team have demonstrated they can lead LendingClub through this turbulent time,” Morris said in a press release. “The board has decided this is the right time to hand full responsibility over to Scott in his role as the CEO.”
Sanborn previously held the roles of president, chief marketing officer, and chief operations officer of LendingClub
In an SEC filing, LendingClub said that it had identified 32 loans made in the second half of December 2009 through the LendingClub platform that were made to help increase reported platform loan volume.
The loans, totaling approximately $722,800 in originations and $25,000 in revenue, were issued to Laplanche and three of his family members. All but three of these loans were repaid in full a month or two later, in January and February of 2010. The remaining three loans were held to maturity and paid in full.
Based on LendingClub’s internal review, which found the loans, the company is confident that there are no other situations in which Laplanche inappropriately originated loans in his or his family’s name.
In announcing Laplanche’s departure in May, Lending Club said an internal probe had found that employees had falsified documentation when selling $22 million of loans to an investor, according to Fortune.