Former Wells Fargo CEO John Stumpf will pay a settlement of $17.5 million for his connection to the bank’s 2016 fake accounts scandal, the Office of the Comptroller of the Currency (OCC) said Thursday. The former executive is also barred from working in the banking industry.
The OCC also announced charges against five other former bank managers, as well as settlements with two other former executives, for their roles in the bank’s sales misconduct.
"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 San Francisco-based bank's high-profile scandal has resulted in a series of fines and several leadership changes, but this is the first time a regulator has charged individuals for the bank’s wrongdoing.
Stumpf joined the bank in 1982 and became CEO in June 2007 and its chairman in January 2010. He resigned in October 2016, after the scandal came to light, replaced by then-President and Chief Operating Officer Tim Sloan.
The nation's fourth-largest bank has been under scrutiny from lawmakers and regulators since Wells Fargo employees were found to have created roughly 3.5 million fake accounts to receive sales-based incentives.
The bank’s former chief administrative officer, Hope Hardison, and the bank’s former chief risk officer, Michael Loughlin, have settled charges totaling $3.5 million for their roles in the sales scandal, the OCC said.
In addition to the settlements, the agency is charging Carrie Tolstedt, who ran Wells Fargo’s community banking division; onetime chief auditor David Julian; Claudia Russ Anderson, former community bank group risk officer; former General Counsel James Strother; and former Executive Audit Director Paul McLinko with civil penalties, totaling $37.5 million.
"The root cause of the sales practices misconduct problem was the Community Bank’s business model, which imposed intentionally unreasonable sales goals and unreasonable pressure on its employees to meet those goals and fostered an atmosphere that perpetuated improper and illegal conduct," the OCC said. "Community Bank management intimidated and badgered employees to meet unattainable sales goals year after year, including by monitoring employees daily or hourly and reporting their sales performance to their managers, subjecting employees to hazing-like abuse, and threatening to terminate and actually terminating employees for failure to meet the goals."
In a statement issued shortly after the OCC’s notice, Wells Fargo CEO Charlie Scharf told employees the agency’s actions are consistent with the bank’s 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," Scharf said. "This was inexcusable. Our customers and you all deserved more from the leadership of this Company."
The bank will not make any remaining compensation payments to the individuals named while it reviews the OCC’s filings, Scharf said.
During a Q4 earnings call with analysts last week, Scharf said he is prioritizing the resolution of Wells Fargo’s regulatory issues, adding that the bank has 12 public enforcement actions that require a significant commitment of resources.