Regulator bans, fines executives
In a settlement with The Office of the Comptroller of the Currency (OCC) Wells Fargo former CEO John Stumpf has agreed to pay $17.5 million and will be banned from the banking industry, due to his role in Wells Fargo’s notorious fake account scandal.
The bank’s former chief administrative officer and chief risk officer also settled with the OCC, for combined fines of $3.5 million.
Fake account scandal
The scandal has plagued Wells Fargo’s reputation since September 2016, when the bank was fined $185 million by the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the City and County of Los Angeles, after it had been discovered that employees had created 1.5 million fake accounts and issued 500,000 fake credit cards, all in customers’ names, and without their permission.
Investigations into the scandal revealed a system of extreme pressure, from the top down, on bank managers and bankers to reach aggressive, nearly impossible sales quotas. Further scrutiny uncovered a culture of weak governance, resulting in the discovery of numerous related scandals at the bank.
Musical chairs CEOs
Mr. Strumpf stepped down as CEO in October 2016, shortly after the news of scandal broke, and was replaced by Timothy Sloan, who had previously served as the bank’s COO and CFO. Mr. Sloan resigned in early 2019, after struggling for over two years to recover from the scandal and rebuild Wells Fargo’s public reputation. The bank most recently hired outsider Charles W. Scharf as its new President and CEO.
Still paying the price
Since news of the scandal broke, Wells Fargo has seen significant turnover in its senior management ranks, and thousands of employees have been let go. The bank’s financial results and share price have significantly lagged its large-cap U.S. banking peers as well.
Wells Fargo’s poor governance has cost the bank billions in fines, fees, and lost earnings.