Three former Wells Fargo execs settle with OCC for fake account scandal roles

The OCC settlements, announced Monday, include a prohibition order and $925,000 civil money penalty (CMP) against former Community Bank Group Finance Officer Matthew Raphaelson; a personal cease and desist order (PC&D) and $400,000 CMP against the former Head of Community Bank Deposit Products Group Kenneth Zimmerman; and a PC&D and $350,000 CMP against Tracy Kidd, the former head of community bank human resources.

“The root cause of the systemic sales practices misconduct was the Community Bank’s business model that imposed unreasonable sales goals on its employees along with unreasonable pressure to meet these goals,” the OCC said. “Additionally, the community bank’s controls were ineffective and were not reasonably designed to prevent or detect the misconduct.”

Individual charges

According to the OCC, Raphaelson and Zimmerman “knew or should have known about the systemic sales practices misconduct problem in the community bank, its root cause, and the risks to the bank from failing to adequately address the problem.” The OCC further said both “failed to fulfill [their] oversight, governance, risk management, and escalation responsibilities.”

Specifically, the OCC said in its prohibition order, Raphaelson “helped to develop and promote a business model that incentivized systemic sales practices misconduct,” which “consisted, in part, of sales goals that were a significant root cause of systemic illegal activity by employees.”

A separate OCC prohibition order described how Zimmerman “was accountable for the quality of the deposit products portfolio and had access to, and awareness of, some data indicative of widespread sales practices misconduct” but “discounted concerns from regional leaders about unreasonably high sales goals and risks associated with sales of secondary deposit products.”

The OCC also described failings in HR risk management. As head of the community bank human resources, Kidd was responsible for HR risk management and approving performance management metrics and incentive compensation plans. She was further responsible “for ensuring that human resource risks were identified, understood, and managed,” the OCC’s cease and desist order stated.

Between 2009 and 2016, Kidd “received information from various sources that sales goals were unreasonable, that employees feared losing their jobs for not meeting those goals, and that employees faced disciplinary action, including termination, for not meeting those goals,” but “did not sufficiently respond to or escalate this information,” the OCC said.

She further “failed to effectively escalate sales practices misconduct issues to senior management and did not credibly challenge community bank senior leadership regarding its culture and sales goals” and “failed to ensure that materially relevant information was provided to a consultant hired by the bank to review sales practices.”

As part of the settlements, Raphaelson, Zimmerman, and Kidd “agreed to cooperate with the OCC in any investigation, litigation, or administrative proceeding related to sales practices misconduct at the bank,” the regulator said.

The settlements are in addition to the actions the OCC announced on Jan. 23, including a $17.5 million civil penalty against former Wells Fargo Bank CEO John Stumpf. The OCC further announced the issuance of a notice of charges against five other former senior bank executives and settlements with two others, in addition to Stumpf.