Wells Fargo will pay $3 billion to resolve civil and criminal penalties with the Department of Justice and Securities and Exchange Commission related to its long-running fake accounts scandal, but the embattled bank is far from out of the woods.
In fact, Wells Fargo will be back under the microscope next month, when it faces three separate hearings in front of the House Financial Services Committee. New CEO Charles Scharf will serve as witness for the first of the hearings, each beginning with the title “Holding Wells Fargo Accountable.”
And judging by the reaction of Chairwoman Maxine Waters (D-Calif.) to the $3 billion settlement, announced Friday, the Committee doesn’t feel Wells Fargo has paid its dues just yet.
A busy March for Wells Fargo
The House Financial Services Committee will hold three hearings on Wells Fargo next month:
- March 10 - The full Committee will convene for a hearing entitled, “Holding Wells Fargo Accountable: CEO Perspectives on Next Steps for the Bank that Broke America’s Trust.” Witness: Charles Scharf, chief executive officer and president, Wells Fargo & Company.
- March 11 - The full Committee will convene for a hearing entitled, “Holding Wells Fargo Accountable: Examining the Role of the Board of Directors in the Bank’s Egregious Pattern of Consumer Abuses.” Witnesses: Elizabeth A. Duke, chair, board of directors, Wells Fargo & Company, and James H. Quigley, chair, board of directors, Wells Fargo Bank, N.A.
- March 25 - The Subcommittee on Oversight and Investigations will convene for a hearing entitled, “Holding Wells Fargo Accountable: Examining the Impact of the Bank’s Toxic Culture on Its Employees.”
“This fine barely dents Wells Fargo’s $200 billion in profit over the last ten years,” said Waters in a statement. “In short, this fine which is coupled with a deferred prosecution agreement, is the cost of doing business for a bank with $1.9 trillion in assets. Wells Fargo must be fully accountable to the public for its crimes.”
The deferred prosecution agreement Wells Fargo entered into Friday ensures no DOJ charges will be filed against the bank provided it abides by all the terms of the agreement. No part of the settlement covered individual employees.
The announcement of the House hearings also revealed the Committee has been investigating Wells Fargo since February 2019. The Committee has been probing Wells Fargo’s “compliance with five regulatory orders issued in response to the company’s widespread consumer abuses,” and the results will be announced as part of the hearings.
“Despite [Friday’s] settlement, these hearings and the Committee’s investigation will make clear that the problems at Wells Fargo remain unresolved,” Waters stated.
Scharf may even agree with that assessment. In a fourth-quarter earnings call with investors last month, he spoke to the company’s need to continue to atone for its past mistakes.
“[W]e must have a strong foundation and move with an extreme sense of urgency to remediate our historical issues,” said Scharf, who was hired to the CEO position in September 2019. “We still have much more work to do to put these issues behind us, and our future depends on us doing this successfully, so we can regain trust with all stakeholders, including our clients, regulators, lawmakers, as well as the broader American population. Ultimately, our actions will dictate when that trust is completely regained, not our words.”
“I’ve given a clear message inside the company that we have not yet met our own expectations or the expectations of others,” Scharf continued. “We must do what’s necessary to put these issues behind us. Our ability to maximize the value of this great franchise is dependent on us running the company with the highest standards of operational excellence and integrity beyond what we’ve done to date.”
Scharf took over the CEO position from Timothy Sloan, who stepped down in March 2019 amid criticism surrounding his more than 30 years at the long-troubled company. Sloan had taken over for John Stumpf, who held the position from 2007 until his retirement in October 2016 when the regulatory heat began turning up.
I've fought for years for real accountability for Wells Fargo and its executives. This is a small step in the right direction, but it's not a substitute for holding senior executives individually accountable—and bringing criminal charges against them if the evidence justifies it. https://t.co/hF0q4S2Ra7— Elizabeth Warren (@ewarren) February 22, 2020
Stumpf has since been banned from the banking industry and agreed to a $17.5 million settlement with the Office of the Comptroller of the Currency (OCC) related to his failed oversight during the scandal. The OCC is further seeking relief from five other executives at the company, four of which are facing multimillion-dollar penalties.
That includes Carrie Tolstedt, former head of the community bank, where Wells Fargo’s sales misconduct took place from 2002-2016. Despite her lower position than Stumpf on the company totem pole, Tolstedt is facing a $25 million penalty for her alleged actions during the scandal.
Tolstedt, according to the OCC, “received millions of dollars annually in incentive compensation, based in part on the profitability of the [Community] Bank.” She “is significantly responsible for the systemic sales practices misconduct problem that existed in the Community Bank for at least 14 years,” the OCC alleges, adding she “developed, implemented, promoted, and enforced the Community Bank’s business model.”
Tolstedt isn’t alone—former General Counsel James Strother, former Chief Auditor David Julian, former Executive Audit Director Paul McLinko, and former Community Bank Group Risk Officer Claudia Russ Anderson are also facing OCC charges. Hope Hardison, former chief administrative officer and director of corporate human resources at Wells Fargo, and Michael Loughlin, former chief risk officer, were assessed penalties of $2.25 million and $1.25 million, respectively, at the time of Stumpf’s OCC settlement.
Seems like this scandal isn’t going away for the bank anytime soon.