Federal regulators are fining former Wells Fargo CEO John Stumpf $17.5 million and banning him from the banking industry for life for his role in a scandal in which company employees opened millions of fake accounts without customers' consent.
Along with the penalty for Stumpf, the Office of the Comptroller of the Currency said Thursday it was suing five other former Wells Fargo executives for a combined $37.5 million in connection with the scandal. Two other executives also settled with regulators, paying million-dollar fines.
This is the first time regulators have punished individual executives for Wells Fargo's wrongdoing. The bank has paid hundreds of millions of dollars in fines and penalties for encouraging employees to fraudulently create accounts in order to meet unrealistic sales goals. Executives like Stumpf did give up tens of millions of dollars in bonuses and pay, but those actions were taken by Wells Fargo itself.
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As part of their settlements and lawsuits against these Wells' executives, regulators seek to ban all of them from ever working in the banking industry.
"The root cause of the sales practices misconduct problem was the Community Bank's business model, which imposed intentionally unreasonable sales goals and unreasonable pressure on its employees to meet those goals and fostered an atmosphere that perpetuated improper and illegal conduct," the comptroller said in its complaint.
"Community Bank management intimidated and badgered employees to meet unattainable sales goals year after year, including by monitoring employees daily or hourly and reporting their sales performance to their managers, subjecting employees to hazing-like abuse, and threatening to terminate and actually terminating employees for failure to meet the goals."
Other execs fined
Patrick Creaven, a Wells Fargo employee in California, said in a statement provided to CBS News by the Committee for Better Banks, an advocacy group representing bank workers, that the fine for Stumpf "is a step toward accountability at the company."
Regulators are also suing Carrie Tolstedt, who was head of Wells Fargo's community banking business until her resignation in 2016. Tolstedt was the executive most directly in charge of Wells' consumer bank, and has been largely blamed for the company's poor banking culture.
The comptroller sued Tolstedt for $25 million for her role in the bank's scandal, a suit Tolstedt's lawyers intend to fight.
"Throughout her career, Ms. Tolstedt acted with the utmost integrity and concern for doing the right thing," said Enu Mainigi, a lawyer who represents Tolstedt. "A full and fair examination of the facts will vindicate Carrie."
Stumpf's fine of $17.5 million is less than Tolstedt because he settled with regulators.
The two other executives who settled and will pay a fine are Hope Hardison, the bank's top human resources executive, and Michael Loughlin, the former chief risk officer. Hardison will pay a $2.25 million fine and Loughlin will pay a $1.25 million fine.
Flawed model
Some analysts said the OCC's penalty has teeth.
"It is misleading to look at the size of the settlement or the proposed fines when assessing the severity of the charges," said Jaret Seiberg, a financial services analyst with Cowen Washington Research Group, told investors in a research note. "The OCC both looks at the ability of the individual to pay the penalty and at whether any compensation has been clawed back. The key is that the OCC identified significant players at the bank and penalized them."
Wells Fargo, which has cycled through two permanent CEOs and a host of interim ones since the scandal occurred, agreed with the government's decision.
"The OCC's actions are consistent with my belief that we should hold ourselves and individuals accountable," said Charlie Scharf, who became Wells Fargo's CEO late last year. "They also are consistent with our belief that significant parts of the operating model of our Community Bank were flawed."
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January 24, 2020 at 06:09AM
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