Regulator Charges Ex-Wells Fargo Executives for Role in Sales Scandal

By Reuters
January 23, 2020Business News
Regulator Charges Ex-Wells Fargo Executives for Role in Sales Scandal
Wells Fargo CEO John Stumpf testifies before a Senate Banking Committee hearing on the firm's sales practices on Capitol Hill in DC. on Sept. 20, 2016. (Gary Cameron/File Photo/Reuters)

WASHINGTON—Wells Fargo & Co’s regulator on Thursday announced it had brought civil charges against eight former executives, including former Chief Executive Officer John Stumpf, marking the first federal action against individuals for their role in the bank’s sales practices scandal.

Stumpf agreed to pay $17.5 million to settle the charges brought by the Office of the Comptroller of the Currency, while former human resources head Hope Hardison and Michael Loughlin, former chief risk officer, settled for $2.25 million and $1.25 million, respectively, the OCC said.

Stumpf, who could not immediately be reached for comment, also agreed to a lifetime ban on working for an OCC-regulated bank.

Five other former executives refused to settle, including Wells Fargo’s former retail bank head Carrie Tolstedt who is facing a potential $25 million civil monetary penalty under the OCC charges. She and the other executives will fight the charges before a judge under the OCC’s administrative process.

“Throughout her career, Ms. Tolstedt acted with the utmost integrity and concern for doing the right thing. A full and fair examination of the facts will vindicate Carrie,” a lawyer for Tolstedt said in a statement.

In a memo to Wells Fargo employees, CEO Charlie Scharf said the company was reviewing Thursday’s filings and will determine what, if any, further action is appropriate with respect to any of the individuals who were named.

A Wells Fargo logo is seen at the SIBOS banking
A Wells Fargo logo is seen at the SIBOS banking and financial conference in Toronto, Canada, on Oct. 19, 2017. (Chris Helgren via Reuters)

The OCC actions would be the first time a federal government agency has sought to punish individuals for their roles in the San Francisco-based lender’s scandal, instead of just the institution.

In bringing its charges, the OCC said these individuals failed to adequately perform their responsibilities, which contributed to the bank’s systemic sales practices problems.

“The misconduct of these individuals allowed the practices to continue for years, affecting millions of bank customers and thousands of lower-level bank employees,” it said.

The country’s fourth-largest U.S. lender has paid out more than $4 billion in fines and penalties since the 2016 revelation that the bank’s sales practices encouraged employees to open potentially millions of unauthorized bank accounts in order to hit lofty sales targets.

Since then, internal and external probes have uncovered issues in each of Wells Fargo’s major business lines, including wealth management and the commercial bank. The fallout has also resulted in the Federal Reserve imposing an unprecedented growth restriction on Wells Fargo’s balance sheet until it proves it has fixed its risk management and controls.

Last year, about 20 former and then-current Wells Fargo executives and directors settled scandal-related allegations in private litigation brought by shareholders for $240 million.

By Karen Freifeld, Chris Prentice

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