John Stumpf, the former head of Wells Fargo who presided over the bank’s cross-selling scandal, has been barred from ever working for a bank, federal officials announced on Thursday.
“The actions announced by the Office of the Comptroller of the Currency 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.
Eight former executives were fined for their role in the sales fraud, including Carrie Tolstedt, head of the community banking division at the center of the scandal. Stumpf has agreed to pay a $17.5 million personal fine, and Tolstedt is facing a penalty that regulators say could top $25 million.
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The once-thriving San Francisco-based banking giant has experienced sluggish demand for its services since the scandal first came to light in 2016. It has paid $185 million in fines for unethical sales practices that included opening around 3.5 million fake accounts without customer authorization. It has also settled a $110 million class-action lawsuit and is currently facing a slew of lawsuits that could total $3 billion.
About 5,300 staff members were fired in connection with the fraud. Stumpf abruptly retired from the company in October 2016, not long after facing blistering questions from congressional panels. The bank has since cycled through several senior executives and CEOs.
An investigation by the bank’s own board in 2017 blamed top management for creating an “aggressive sales culture” that led to the phony accounts. Wells’ board singled out Stumpf and Tolstedt, saying both executives dragged their feet for years regarding problems at what was then the second-largest U.S. bank, and were ultimately unwilling to accept criticism that the bank’s sales-focused business model was failing.
Many current and former employees talked of intense and constant pressure from managers to sell and open accounts, and some said it pushed them into unethical behavior. The report backs up those employees’ accounts. The board also found that Stumpf was unwilling to change Wells’ business model when problems arose.
“His reaction invariably was that a few bad employees were causing issues … he was too late and too slow to call for inspection or critical challenge to (Wells’) basic business model,” the board said.
Shares in Wells Fargo were down by around 0.5 percent Thursday afternoon.
Lucy Bayly