A regulator barred former
Wells Fargo
WFC -0.70%
& Co. chief executive
John Stumpf
from the banking industry and fined him $17.5 million over the firms fake-accounts scandal, an extraordinary sanction for a top executive at a large bank. Mr. Stumpf agreed to the lifetime ban in a settlement with the Office of the Comptroller of the Currency. The firms former chief administrative officer and chief risk officer settled similar civil charges, and five other former executives, including the former consumer-bank chief, were also charged.
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The sanctions against Mr. Stumpf are noteworthy because few top bank executives have faced penalties of this scale in recent years. Banks paid tens of billions of dollars in fines for conduct during the financial crisis, but enforcement efforts drew criticism from some observers because of a lack of charges against individuals.
For much of Mr. Stumpfs tenure, Wells Fargo was seen as a folksy industry darling that had escaped the financial crisis largely unscathed. But that reputation was left in tatters after it became public that an aggressive sales culture led employees to open millions of possibly fake accounts.
A lifetime ban on a CEO of a big bank is unprecedented in the megabank era that started in the 1990s. One of the few similar punishments was when the Securities and Exchange Commission in 2010 barred former Countrywide Financial Corp. CEO
Angelo Mozilo
from ever serving as an officer or director of a publicly traded company.
The OCC said Thursday that Mr. Stumpf was or should have been aware of the problem and its root cause, and that there was a culture in the Community Bank that resulted in systemic violations of laws and regulations.
Employees submitted many complaints about pervasive pressure and illegal sales activity to Mr. Stumpfs office, but he didnt respond to them, the agency said.
One employee wrote to the CEOs office in 2013: I was in the 1991 Gulf War. This is sad and hard for me to say, but I had less stress in the 1991 Gulf War than working for Wells Fargo.
The OCCs actions also show a flexing of regulatory muscle at an agency that hasnt always been known for throwing its weight around.
Since the scandal, though, the regulator has turned up the pressure on Wells Fargo. Officials last year debated whether to force out top bank executives, The Wall Street Journal reported at the time, and Mr. Stumpfs successor stepped down soon after.
The fake-accounts scandal came into public view when the OCC, the Consumer Financial Protection Bureau and the Los Angeles City Attorneys office sanctioned Wells Fargo in September 2016.
Mr. Stumpf, who spent more than three decades at the bank, was hauled before Congress and sparred with Sen. Elizabeth Warren, a Massachusetts Democrat who called for him to resign. He did shortly afterward. He also forfeited about $70 million in pay.
Top executives underestimated the ire the fake accounts would provoke among customers, regulators and lawmakers. Criticizing the bank became a bipartisan effort. For instance, President Trump, a Republican, targeted Wells Fargo in a tweet in 2017, pledging to punish the bank despite his administrations broader push to ease financial regulations.
Wells Fargos board said in a 2017 investigation that in the years before the issues became public, Mr. Stumpf moved too slowly to address the fake accounts. But the report also said responsibility most surely does not lie with John Stumpf alone, and pinned much of the blame on other executives like former consumer-bank head
Carrie Tolstedt.
The OCC has previously said that some of its own employees also fell down on the job of catching the sales problems at Wells Fargo.
The OCC on Thursday also settled charges against Wells Fargos former chief administrative officer
Hope Hardison
and former chief risk officer
Michael Loughlin.
They paid a combined $3.5 million.
Attorneys for Mr. Stumpf and Ms. Hardison declined to comment. Mr. Loughlin couldnt be reached for comment.
The regulator also charged five other former executives, including the banks former general counsel, former chief auditor and Ms. Tolstedt, who ran the consumer bank when many of the fake accounts were opened. Those cases are slated to play out in administrative proceedings. The agency is seeking $25 million from Ms. Tolstedt and a lifetime ban from banking. Ms. Tolstedt has already forfeited $66 million of pay.
An attorney for Ms. Tolstedt said throughout her career, Ms. Tolstedt acted with the utmost integrity and concern for doing the right thing. A full and fair examination of the facts will vindicate Carrie.
Since the fake-accounts scandal became public, serious problems have cropped up in the banks other business lines, including foreign exchange and wealth management, and the lender has struggled with falling revenue. The Federal Reserve took the rare step of capping the banks growth in February 2018, citing risk-management deficiencies.
Tim Sloan,
another company veteran who succeeded Mr. Stumpf as CEO, stepped down last March. It took months for the board to name his replacement, Bank of New York Mellon Corp. CEO
Charles Scharf.
In an earnings call last week, Mr. Scharf said regulatory problems were his priority. Since joining, Ive been spending almost all of my time on these issues, he told analysts. In a Thursday note to employees, Mr. Scharf said the company will not make any remaining compensation payments that may be owed to these individuals while we review the filings.
The banks shares have fallen about 3% since the day it was fined for the fake accounts, missing out on a broader bank rally that pushed the KBW Nasdaq Bank Index up 52%. It reported annual revenue of $85.06 billion last year, down almost 4% from 2016.
Wells Fargo has also said it started discussions to settle a joint Justice Department and Securities and Exchange Commission probe into the fake-accounts scandal.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com and Ben Eisen at ben.eisen@wsj.com
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