Wells Fargo Were Sorry
The Toll of Wells Fargo's Simulated Account Scandal Grows by $three Billion
The bank reached a settlement with federal prosecutors and the Securities and Exchange Commission after abusing customers.
Wells Fargo has agreed to pay $3 billion to settle criminal charges and a civil action stemming from its widespread mistreatment of customers in its community banking concern over a xiv-twelvemonth catamenia, the Justice Department announced on Friday.
From 2002 to 2016, employees used fraud to run across impossible sales goals. They opened millions of accounts in customers' names without their knowledge, signed unwitting business relationship holders up for credit cards and beak payment programs, created faux personal identification numbers, forged signatures and fifty-fifty secretly transferred customers' coin.
In court papers, prosecutors described a pressure-cooker environs at the bank, where low-level employees were squeezed tighter and tighter each twelvemonth past sales goals that senior executives methodically raised, ignoring signs that they were unrealistic. The few employees and managers who did encounter sales goals — by any means — were held upward as examples for the rest of the piece of work force to follow.
"This case illustrates a consummate failure of leadership at multiple levels inside the bank," Nick Hanna, U.S. attorney for the Central District of California, said in a statement. "Wells Fargo traded its difficult-earned reputation for short-term profits, and harmed untold numbers of customers forth the way."
Now the bank is grappling with the lingering consequences. Part of Friday's deal, which includes a settlement with the Securities and Exchange Commission, is a deferred prosecution agreement, a pact that could expose the bank to charges if information technology engages in new criminal action.
"We are committing all necessary resources to ensure that null similar this happens again," Wells Fargo's chief executive, Charles West. Scharf, said in a statement on Friday.
As part of its understanding with the South.E.C., the banking concern will set up a $500 million fund to compensate investors who suffered when Wells Fargo failed to inform them that its community cyberbanking business was non as stiff as the faux accounts made it seem. The money is included in the $3 billion settlement full.
During the final five years of abuse, the banking concern quietly fired thousands of employees for falsifying records in response to customer complaints, according to courtroom filings, and disciplined tens of thousands more than.
In the filings, prosecutors described how, even later on some Wells Fargo executives tried to adjourn the sales abuses, the banking company hid the problem from investors by irresolute its public descriptions of its sales practices over several years. The intent was to be clearer well-nigh the limitations of the bank's strategy, known as "cross-selling," without tipping investors off to the problems that senior executives had uncovered, the filings said.
The practices covered by the settlement — which includes an admission by Wells Fargo that information technology falsified banking records and harmed customers' credit ratings — are not the but misbehavior the bank has revealed since 2016. Since the allegations came to light in a settlement with California authorities and the Consumer Fiscal Protection Agency, the banking company has also admitted it charged mortgage customers unnecessary fees and forced auto loan borrowers to buy insurance they did not need.
The mortgage and auto loan claims are not part of Fri'south bargain, and Justice Department officials declined to annotate on whether they intended to accept more than action against the banking company. They said the settlement also did not include like conduct that fell outside the 14-year period.
Wells Fargo is still under investigation by the Consumer Financial Protection Agency for abruptly closing customers' accounts, and has said in regulatory filings that the authorities are looking into improper fees it charged wealth direction customers.
Friday'southward deal is also unrelated to a standing criminal investigation of former Wells Fargo executives' individual roles in the sales practices scandal. On Jan. 23, the Role of the Comptroller of the Currency fined former top executives millions of dollars each for overseeing the banking concern while it abused customers. A former Wells Fargo chief executive, John Yard. Stumpf, agreed to pay $17.5 million. Carrie L. Tolstedt, Wells Fargo's former head of retail banking, is battling a $25 million fine.
Ms. Tolstedt was described past title, but non by name, in the court papers filed past the Justice Department every bit part of Friday's settlement. She appeared every bit "Executive A," who the filings said was the "senior executive vice president in charge of the community banking concern" from 2007 to 2016, a position Ms. Tolstedt held during that time.
According to the papers, Executive A ignored concerns that other executives raised virtually cross-selling, lied to regulators and Wells Fargo's board, and tightly controlled the banking company'southward public disclosures.
In 2015, the bank adult a new way to calculate the volume of accounts information technology was opening for customers, noting whether the accounts were used or simply sat dormant. But it never released the figures produced past this new method, "in part considering of concerns raised by Executive A and others that its release would cause investors to ask questions about Wells Fargo'south historical sales practices."
"Ms. Tolstedt acted appropriately and in good faith at all times, and the effort to scapegoat her is both unfair and unfounded," her lawyer Enu Mainigi said in an email to The New York Times.
Fri's $three billion penalisation, while large, is not record breaking. In 2015, a judge ordered BNP Paribas to pay nigh $9 billion for sanctions violations. Fri's fine is non even the largest against Wells Fargo. In 2012, when the country's 5 largest banks paid a total of $26 billion to land and federal authorities to settle investigations into their mortgage lending practices in the years leading up to the 2008 financial crisis, Wells Fargo'due south portion was $5.35 billion. Including Friday's penalisation, the banking company has paid more than $18 billion in fines for misconduct since the financial crisis.
Senior Justice Department officials told journalists in a briefing on Fri that the bank's payments to other authorities, including $1 billion in fines to the Role of the Comptroller of the Currency and the Consumer Financial Protection Bureau in 2018, were a mitigating factor in determining how much it would owe in the current settlement.
Wells Fargo's profits last year totaled nearly $20 billion.
In early on 2018, the Federal Reserve imposed growth restrictions on Wells Fargo that will be lifted just later on the banking concern has shown its regulators that it has made meaning changes to forbid bad behavior like the faux account scandal. Since taking over in October, Mr. Scharf has non offered any hints about when that goal might be achieved.
Stacy Cowley contributed reporting.
Source: https://www.nytimes.com/2020/02/21/business/wells-fargo-settlement.html
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