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Former Wells Fargo Execs Fined $58.5M by OCC

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The Office of the Comptroller of the Currency issued fines of $37.5 million against five former Wells Fargo executives and reached settlements of $21 million with ex-Chairman and CEO John Stumpf and several other former members of the bank’s operating committee.

Stumpf is barred from the business and will pay a $17.5 million fine. Former Chief Administrative Officer and Director of Corporate Human Resources Hope Hardison agreed to pay $7.5 million, while ex-Chief Risk Officer Michael Loughlin is set to pay a $1.25 million fine.

The biggest fine for the former bank execs affects Carrie Tolstedt, who led Wells Fargo’s community bank during the fake-accounts scandal. She now faces a $25 million penalty, but it could be increased, the OCC says. Tolstedt and four others are fighting the allegations and have not reached a settlement.

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 Office over 2 million-plus client accounts and credit cards that were potentially unauthorized.

See A Timeline of the Wells Fargo Scandals

“The actions announced by the OCC today reinforce the agency’s expectations that management and employees of national banks and federal savings associations provide fair access to financial services, treat customers fairly, and comply with applicable laws and regulations,” Comptroller of the Currency Joseph Otting said in a statement.

The charges allege that the executives “failed to adequately perform their duties and responsibilities, which contributed to the bank’s systemic problems with sales practices misconduct from 2002 until October 2016,” the OCC explained.

“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, adding that ex-community banking risk officer Claudia Russ Anderson made false and misleading statements to the OCC and “actively obstructed the OCC’s examinations of the bank’s sales practices.”

Continued Battle

Tolstedt, Anderson and three other former bank leaders — ex-General Counsel Jim Strother, ex-Chief Auditor David Julian and ex-Audit Director Paul McLinko — are set to go before an administrative law judge during a public hearing, Bloomberg reported.

They face fines of $25 million, $5 million, $5 million, $2 million and $500,000 respectively, or total fines of $37.5 million.

“Throughout her career, Ms. Tolstedt acted with the utmost integrity and concern for doing the right thing,” said Enu Mainigi, her lawyer at Williams & Connolly in the report. “A full and fair examination of the facts will vindicate Carrie.”

“At all times, Mr. Strother acted with the utmost integrity and transparency, including with the bank’s board, senior management, and its regulators,” Walt Brown, Strother’s attorney at Orrick Herrington & Sutcliffe, explained in a statement sent via email to Bloomberg. “The OCC’s charges against Mr. Strother are false and unfounded, and he intends to vigorously defend against them.”

Current Wells Fargo CEO and President Charlie Scharf told bank employees in a note: “The OCC’s actions are consistent with my belief that we should hold ourselves and individuals accountable. They also are consistent with our belief that significant parts of the operating model of our Community Bank were flawed.

“At the time of the sales practices issues, the Company did not have in place the appropriate people, structure, processes, controls, or culture to prevent the inappropriate conduct. This was inexcusable. Our customers and you all deserved more from the leadership of this Company,” Scharf explained. 

The bank will consider “further action” and will make no remaining compensation payments “to these individuals while we review the filings,” he said. 

“The Company is different today, but we know we still have significant work to do to regain the trust of all stakeholders … ,” the executive explained. “We must all dedicate ourselves to ensuring that such failings never again occur at Wells Fargo.”

Wells Fargo’s advisor headcount stands at 13,512 vs. nearly 13,948 a year ago. That’s down 1,576 (or 10.4%) from Sept. 30, 2016, when the firm had 15,086 registered reps and began making headlines for the fake accounts.

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