Lending Club ousts CEO, stock plunges 35 percent

Lending Club Corp. CEO Renaud Laplanche abruptly resigned Monday and the company’s stock plummeted after an internal review found the online lending firm knowingly sold an investor $22 million in loans that did not meet the investor’s criteria.

The incident is the latest to focus scrutiny on a relatively new business model that matches borrowers with investors willing to finance their loans online. Laplanche pioneered this model at Lending Club, where board members include former Morgan Stanley CEO John Mack, ex-U.S. Treasury Secretary Lawrence Summers and Mary Meeker, a partner at Kleiner Perkins Caufield & Byers.

A board-led internal investigation found multiple people at the company knew the loans were sold counter to the investor’s “express instructions,” Lending Club reported Monday. It also found a senior manager at the San Francisco company changed the dates on loans worth $3 million.

Forensic audits found no other loans had similar date changes, said Hans Morris, Lending Club’s newly named executive chairman.

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“A violation of the company’s business practices, along with a lack of full disclosure during this review, was unacceptable to the board,” Morris said Monday in a conference call with Wall Street analysts. “This is not something the board will compromise on in any way. The board took swift and immediate action, and we introduced swift and remedial steps to rectify the issues.”

The fiasco resulted in the termination or resignation of three other senior managers, Lending Club said. They included Jeff Bogan, head of the firm’s investor group, and Adelina Grozdanova, who managed deals with institutions who buy Lending Club loans, The Wall Street Journal reported. The third manager could not be identified.

None of the departed executives will receive severance, the company said.

Lending Club named President Scott Sanborn acting CEO and does not plan to immediately search for a replacement, the company said.

Upon discovering the loans’ inadequacies, Lending Club repurchased them from Jefferies Group at face value in April to ensure the investor did not take a loss.

“Our priority is to reaffirm our commitment to trust, compliance and risk management that have been so essential in the success of our online marketplace,” Sanborn said during Monday’s call.

Lending Club reported first-quarter profits Monday of $4.1 million, or 1 cent per share, up from a $6.4 million loss in the same period last year. Excluding certain one-time expenses, earnings were 5 cents per share, meeting analysts’ estimates. Executives said they would hold off on providing guidance for the coming quarters.

Lending Club Corp. shares plunged Monday almost 35 percent to $4.62.

Lending Club is not the first to suffer in the online lending space. Prosper Marketplace cut 28 percent of its staff last week, and OnDeck Capital’s shares were down almost 40 percent last week.

Jessica Floum is a San Francisco Chronicle staff writer. Email: jfloum@sfchronicle.com Twitter: @JFloum