Former Wells Fargo executives fined over OCC scandal

This was reported by the Office of the Currency Controller on Tuesday that civil penalties were assessed Claudia Russ Anderson, formerly Community Bank Group Risk Officer, and internal auditors David Julian and Paul McLinko.

The main component of Community Bank Group is the retail activity of the branches.

“These actions were taken in response to the unsound or unsound banking practices of the former executives, which involved systemic and widespread sales practice violations,” the OCC said in a news release.

Wells Fargo admitted that from 2002 to 2016 sales pressure from trying to increase the number of product accounts per customer, known as cross-selling induced Community Bank personnel—primarily tellers and other branch employees—to open millions of accounts and other financial products that were unauthorized or fraudulent.

The OCC heard a separate case involving Anderson and a joint case involving Julian and McLinko.

Anderson was fined $10 million. The OCC determined that from 2013 to 2016, Anderson failed to credibly challenge the bank’s incentive compensation program, failed to implement effective controls to manage risks associated with unfair sales practices, did not exacerbate known or apparent risks, and repeatedly and consistently downplayed sales practice. misconduct.

The ruling also found that Anderson violated the law by failing to provide information or providing false, incomplete or misleading information to the OCC during inspections in 2015.

Julian, the former chief auditor, was fined $7 million, and McLinko, the former chief audit executive, was fined $1.5 million.

It was determined that Julian and McLinko failed to plan and conduct audit activities that should have detected and documented the sales practice violations and failed to adequately escalate the sales practice violations. McLinko was found to have failed to maintain professional independence from Community Bank.

For comparison, Carrie Tolstedt, who worked as the head of Community Bank for about nine years. In March 2023, it paid a $17.5 million fine to the OCC for its role in the scandal. The fine was reduced from the original $25 million.

Tolstedt was retroactively fired for cause by Wells Fargo shortly after the scandal erupted publicly in September 2016. The OCC said Tolstedt “was substantially responsible for systemic violations of the bank’s sales practices.”

In March 2023 Tolstedt is the first former or fired Wells Fargo employee to plead guilty to criminal liability for the scandal.

After pleading guilty to one count of obstructing a bank investigation involving the OCC, she was sentenced in September 2023 to three years of probation, including six months of house arrest.

Meanwhile, John Stumpf, the bank’s chairman and chief executive officer at the time of the scandal, received the bank’s permission for retirement in October 2016.

At the time of his retirement, Stumpf lost at least $17.23 million in total compensation, and the bank also forfeited $41 million in unvested stock from Stumpf and $19 million from Tolstedt.

In January 2020, the OCC fined Stumpf $17.5 million. He agreed to the ban, which provides for a lifetime ban from working in the banking sector.

In total, the OCC imposed fines totaling at least $67 million on 11 former Wells Fargo executives.

During the 14-year active period of the fraudulent customer accounts scandalWells Fargo collected millions of dollars in fees and interest it was not entitled to, damaged customers’ credit scores, and illegally misused customers’ sensitive personal information.

Examples of fraudulent accounts included: using existing customers’ identities — without their consent — to open accounts; forging customer signatures to open accounts without authorization; creation of PIN codes for activation of unauthorized debit cards; and moving money from millions of customer accounts to unauthorized accounts.

Other examples include: opening credit cards and bill payment products without authorization; changing customer contact information to prevent customers from learning about unauthorized accounts and to prevent Wells Fargo employees from contacting customers to conduct customer satisfaction surveys; and encouraging customers to open accounts they did not want or need.

In 2017, Wells Fargo admitted to opening and issuing at least 3.53 million unauthorized checking and savings accounts, debit and credit cards between 2009 and October 2016.

Although the majority of fraudulent accounts were created in California and Arizona, the media reported 38,722 unauthorized customer accounts created in North Carolina and 23,327 in South Carolina.

“The decisions explained that under pressure to meet unreasonable sales targets, thousands of bank employees engaged in widespread improper sales practices,” the OCC said.

About 5,300 employees at Wells Fargo’s retail branch were laid off at the start of the scandal.

In February 2020 the bank agreed to pay $3 billion to settle The US Department of Justice and the Securities and Exchange Commission are investigating fraudulent sales practices by its Community Bank division.

The biggest shadow still hanging over Wells Fargo is the Fed’s order issued on February 3, 2018, which prohibits the bank from increasing total assets beyond the $1.93 trillion it had as of December 31, 2017.

Federal Reserve Chairman Jerome Powell said the asset limit will remain in place in 2021 until the Fed is satisfied that Wells Fargo has addressed a number of internal risk management and control issues.

In February The OCC revoked the consent order According to Wells Fargo, this is the sixth consent order revoked by the federal regulatory agency since 2019.

However, there were still at least eight consent orders pending in February 2023, according to banking analysts.

According to the reports of many mass media, September 27. Wells Fargo submitted a third-party review of its risk and control operations to the Federal Reserve in hopes of accelerating the lifting of its asset limits.