Former Wells Fargo CEO barred from industry, other execs charged for role in phony account scandal
Former CEO John Stumpf was also hit with a $17.5M civil penalty
Odeon Capital Group's Dick Bove on Wells Fargo naming Charles Scharf the new CEO and president.
Embattled banking giant Wells Fargo is back in the news again on Thursday after five former executives were charged for their connection to the bank’s sales practice misconduct and its former CEO was barred from the banking industry.
The Office of the Comptroller of the Currency (OCC) announced the charges Thursday while noting it had also settled with some former executives.
“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 OCC issued a civil money penalty of $17.5 million against former CEO John Stumpf and barred him from working in the banking industry for the remainder of his life. He previously forfeited his unvested equity awards, valued at around $41 million, and his 2016 bonus and salary. Stumpf returned incentive compensation valued at $28 million
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Here’s a look at the individuals who were charged:
Carrie Tolstedt, former head of the community bank
Penalty: Prohibition Order and $25 million Civil Money Penalty
Claudia Russ Anderson, former community bank group risk officer
Penalty: Prohibition Order and $5 million CMP
James Strother, former general counsel
Penalty: Personal Cease & Desist (PC&D) Order and $5 million CMP
David Julian, former chief auditor
Penalty: PC&D Order and $2 million CMP
Paul McLinko, former executive audit director
Penalty: PC&D Order and $500,000 CMP
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The alleged failure of these individuals to adequately perform their duties is said to have led to sales practice misconduct, between 2002 until 2016 – leading up to the phony account scandal.
In reponse to the actions, current Wells Fargo CEO Charlie Scharf said the company is reviewing the order and will determine if any further action is necessary with respect to the named individuals.
"Over the past three years, the company had made fundamental changes to its business model, compensation programs, leadership, and governance," Scharf wrote. "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."
In 2016, Wells Fargo came under fire for opening millions of accounts for customers, which they did not know of nor request, as employees came under intense pressure to meet sales targets. More than 5,000 employees were fired as a result.
Penalties may include prohibition from being a part of the banking industry ever again, a civil money penalty and/or a personal cease-and-desist order, which would “require the individual to take certain affirmative actions or refrain from certain conduct in any future involvement in the banking industry,” according to the OCC.
The OCC also issued a $2.25 million penalty against former Chief Administrative Officer and Corporate Human Resources Director Hope Hardison and a $1.25 penalty against former Chief Risk Officer Michael Loughlin. All of those penalties were issued in connection to these individuals' roles in sales practice misconduct as well.