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Former Wells Fargo Execs Could Face Criminal Charges Soon: Report

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A Wells Fargo branch in New York (Photo: Bloomberg) A Wells Fargo branch in New York (Photo: Bloomberg)

Several former Wells Fargo executives are under criminal investigation due to the bank’s fake-accounts scandal, according to a report in American Banker late Friday, which says they may be indicted as early as this month.

While earlier federal investigations focused on lower-level staff members, ex-members of Wells Fargo’s top levels are currently the target, sources familiar with the situation told the publication. 

The news comes more than three years after the bank agreed to pay a fine and $185 million settlement with the Consumer Financial Protection Bureau, Office of the Comptroller of the Currency and Los Angeles City Attorney’s over 2 million-plus client accounts and credit cards that were potentially unauthorized.

(See A Timeline of Wells Fargo Scandals.)

Organizations involved in the criminal investigation include the Department of Justice, OCC and Securities and Exchange Commission, according to the report, which added that the matter “remains fluid and is subject to change.”

(The OCC, SEC and Wells Fargo declined to comment on the situation on Friday, according to the American Banker report; the bank also did so on Saturday, when contacted by ThinkAdvisor.)

In a 2017 report about the matter, PricewaterhouseCoopers concluded that Wells Fargo’s retail banking unit in Los Angeles and Orange County had the greatest number of “potential simulated funding accounts per employee” nationwide. Also, close to 5,400 employees were fired for sales-related violations from early 2011 to early 2016.

Recent Bank Results

Wells Fargo missed earnings estimates as it recorded a $1.6 billion charge in the third quarter of 2019 tied to litigation expenses. The bank reported profits of $4.61 billion, or $0.92 per share, versus net income of $6.01 billion, or $1.13 per share, in the same period a year ago.

Interim CEO Allen Parker said the bank “continued to make progress on our top priorities … , and we’re all looking forward to Charlie Scharf’s joining Wells Fargo on Oct. 21 as the company’s Chief Executive Officer and president,” adding that the firm has “more work ahead.”

The Wealth and Investment Management unit had 13,723 financial advisors as of Sept. 30, down 76 from the earlier quarter and off 751 from a year ago. 

This headcount is also down 1,363 from Sept. 30, 2016, when news of the fake accounts came to dominate headlines.

The wealth unit had net income of $1.3 billion, up 75% from a year ago thanks to a $1.1 billion gain on the sale of its Institutional Retirement & Trust business to Principal Financial Group.

Total client assets stand at $1.9 trillion, down 1% from Q3’18. In a statement, the bank said it “hired more advisors” than it lost to rivals. It also insists that its declining headcount stems mainly from “advisors retiring or otherwise leaving the industry.”

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