Wells Fargo indicated just over a week ago that the fallout from its fake account scandal was far from over, disclosing that it has at least $3.1 billion set aside for expected litigation payouts.

But that is at the company level. Meanwhile, the fallout for the executives who failed to prevent the fake account scandal looks to be far from over as well.

The Office of the Comptroller of the Currency announced Thursday that it is dropping the hammer on several of the bank’s former executives, on whose watch the fake account scandal took place.

The trouble all began in 2016, when the Consumer Financial Protection Bureau, the OCC, and the City and County of Los Angeles fined the bank $185 million for more than 5,000 of the bank’s former employees opening as many as 2 million fake accounts in order to get sales bonuses.

But that was hardly the end of the consequences that befell the bank. The bank’s CEO and chairman, John Stumpf, promptly resigned from his positions. 

From there, the bank took additional action to address the issues that led to the fines, including revoking 2016 bonuses for its top executives, firing four senior managers, outing another two executives, and splitting the role of chairman and CEO. 

Beyond that, the bank clawed back more than $100 million in bonuses from Stumpf and former head of community banking Carrie Tolstedt, both of whom could have put a stop to the fake account creation pipeline. 

The company even prepared a new pay plan where employee compensation was no longer tied to sales.

The scandal also led to hundreds of millions of dollars in payouts to regulators, affected customers, and shareholders.

But the bank, and the executives who failed to stop the creation of the fake accounts, are not done paying the piper yet.

The OCC announced Thursday that it is fining Stumpf $17.5 million as part of a consent order that also prohibits Stumpf from working for a bank in any capacity without the OCC’s permission.

According to the OCC, Stumpf did not do nearly enough to address the fake account issue either during his time as head of the community bank section of Wells Fargo or as the bank’s CEO.

“[Stumpf] was or should have been aware of the problem and its root cause,” the OCC said in its consent order. “During Respondent’s tenure, there was a culture in the Community Bank that resulted in systemic violations of laws and regulations, breaches of fiduciary duties, and unsafe or unsound practices by large numbers of Community Bank employees.”

According to the OCC, Stumpf’s failures were repeated and systemic.

From the OCC:

Respondent failed to adequately supervise the Head of the Community Bank with respect to the Community Bank’s sales practices, which allowed the Community Bank’s systemic sales practices misconduct problem to continue for many years. Respondent failed to sufficiently challenge the business model of the Community Bank during his tenure as Chairman and Chief Executive Officer. Respondent neglected to adequately inform himself about the reasonableness of the sales goals and pressure in the Community Bank, the impact of those goals, and the adequacy of controls to detect and prevent sales practices misconduct.

Respondent failed to respond to numerous warning signs, including many team member complaints submitted directly to his office regarding pervasive sales pressure, fear of termination for not meeting unreasonable sales goals, and illegal and unethical sales activity across the Community Bank.

Respondent was frequently informed by the leaders of the Community Bank, as well as leaders in the Risk, Human Resources, Audit, and Legal functions at the Bank, that the sales practices issues were the result of isolated instances of individual employee misconduct, not systemic conduct at the Community Bank, and that the controls within the Community Bank were effective and reasonably designed to detect or prevent the misconduct. Respondent failed to ascertain that these assurances were inaccurate.

To read the Stumpf’s full consent order, click here.

Beyond the punishment against Stumpf, the OCC also levied a $2.25 million fine against the bank’s former Chief Administrative Officer and Director of Corporate Human Resources Hope Hardison, who took a leave of absence from the bank in 2018 amid the fallout. 

To read the Hardison’s consent order, click here.

The OCC also fined former Chief Risk Officer Michael Loughlin $1.25 million for his role in the scandal. To read Loughlin’s consent order, click here.

Both Hardison and Loughlin were among the Wells Fargo execs who had their 2016 bonuses revoked as the scandal widened.

But those aren’t the only Wells Fargo execs in the OCC’s crosshairs.

The regulator also announced charges against five other execs, including Tolstedt, the head of the community bank during the bulk of the fake account creations.

According to the OCC, it is seeking a fine of $25 million against Tolsdedt for her actions, or lack thereof, to prevent the fake account scandal from spreading.

Beyond that, the OCC is seeking a fine of $5 million against Claudia Russ Anderson, who was community bank group risk officer; a fine of $5 million against James Strother, who was the bank’s general counsel; a fine of $2 million against David Julian; who was the bank’s chief auditor; and a fine of $500,000 against Paul McLinko, who was the bank’s executive audit director.

Strother and Julian were also among the execs who had their 2016 bonuses revoked. Julian also took a leave of absence from the bank in 2018 along with Hardison over the roles in the fake account scandal.

Russ Anderson, meanwhile, was fired by the bank in 2017 for her actions.

And according to the OCC, the charges facing Russ Anderson go beyond the actions within the bank’s operations itself and into the realm of obstructing the regulator’s investigation.

The OCC alleges that Russ Anderson “made false and misleading statements to the OCC and actively obstructed the OCC’s examinations of the bank’s sales practices.”

The charges against each of the accused individuals are lengthy and comprehensive, but one section sticks out:

The Community Bank’s business model and the senior leaders of the Bank presented a stark dilemma to employees every day for 14 years: they could engage in sales practices misconduct—much of which was illegal—to meet their goals, or they could struggle to meet their goals and face adverse consequences, including losing their jobs.

To read the full charges against the five execs, click here.

It should be noted that the OCC stated that the dollar amount of the fines or potential fines is based on several factors.

“In making the determination to file the notice of charges and enter into these settlements, the OCC considered, among other things, the culpability of these individuals and their financial resources, including compensation previously clawed back by the bank,” the OCC stated.

Beyond the monetary punishment being sought by the OCC, the charged individuals could also face additional sanctions, including: a lifetime prohibition from participating in the banking industry, a personal cease and desist order, or other actions.

“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.

As for Wells Fargo, the bank’s new CEO Charlie Scharf sent a letter to the bank’s employees addressing the OCC’s actions.

“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,” Scharf said in his letter. “This was inexcusable. Our customers and you all deserved more from the leadership of this Company.”

Scharf also said that the bank may consider taking further action against the named individuals and “will not make any remaining compensation payments that may be owed to these individuals while we review the filings.”

Here’s the text of Scharf’s letter in full:

Dear Colleagues,

Today the Office of the Comptroller of the Currency announced a series of actions against former employees regarding their behavior around the historical Community Banking sales practices. In addition, the OCC provided a detailed account of business practices and management responses based on its extensive investigation.

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.

We are reviewing today’s filings and will determine what, if any, further action by the Company is appropriate with respect to any of the named individuals. Wells Fargo will not make any remaining compensation payments that may be owed to these individuals while we review the filings.

Over the past three years, the Company has made fundamental changes to its business model, compensation programs, leadership, and governance. We are committing all necessary resources to ensure that we operate with the strongest business practices and controls, maintain the highest level of integrity, and have in place the appropriate culture. The Company is different today, but we know we still have significant work to do to regain the trust of all stakeholders.

I know these things that have occurred in the past have made many of your jobs more difficult.

We must all dedicate ourselves to ensuring that such failings never again occur at Wells Fargo.

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