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| The Price of Wells Fargo’s Fake Account Scandal Grows by $3 Billion | |
| (32 minutes later) | |
| 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 bank over a 14-year period, the Justice Department announced on Friday. | 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 bank over a 14-year period, the Justice Department announced on Friday. |
| From 2002 to 2016, employees used fraud to meet impossible sales goals. They opened millions of accounts in customers’ names without their knowledge, signed unwitting account holders up for credit cards and bill payment programs, created fake personal identification numbers, forged signatures and even secretly transferred customers’ money. | From 2002 to 2016, employees used fraud to meet impossible sales goals. They opened millions of accounts in customers’ names without their knowledge, signed unwitting account holders up for credit cards and bill payment programs, created fake personal identification numbers, forged signatures and even secretly transferred customers’ money. |
| In court papers, prosecutors described a pressure-cooker environment at the bank, where low-level employees were squeezed tighter and tighter each year by sales goals that senior executives methodically raised, ignoring signs that they were unrealistic. The few employees and managers who did meet sales goals — by any means — were held up as examples for the rest of the work force to follow. | |
| “This case illustrates a complete failure of leadership at multiple levels within the bank,” Nick Hanna, U.S. attorney for the Central District of California, said in a statement. “Wells Fargo traded its hard-earned reputation for short-term profits, and harmed untold numbers of customers along the way.” | |
| Now the bank is grappling with the lingering consequences. Part of Friday’s deal, which includes a $500 million fine by the Securities and Exchange Commission, is a deferred prosecution agreement, a pact with prosecutors that could expose the bank to charges if it engages in new criminal activity. | Now the bank is grappling with the lingering consequences. Part of Friday’s deal, which includes a $500 million fine by the Securities and Exchange Commission, is a deferred prosecution agreement, a pact with prosecutors that could expose the bank to charges if it engages in new criminal activity. |
| “We are committing all necessary resources to ensure that nothing like this happens again,” Wells Fargo’s chief executive, Charles W. Scharf, said in a statement on Friday. | |
| The penalty, while large, is not record breaking. In 2015, a judge ordered BNP Paribas to pay nearly $9 billion for sanctions violations. Friday’s fine is not even the largest against Wells Fargo. In 2012, when the country’s five largest banks paid a total of $26 billion to state and federal authorities to settle investigations into their mortgage lending practices in the years leading up to the 2008 financial crisis, Wells Fargo’s portion was $5.35 billion. Including Friday’s penalty, the bank has paid more than $18 billion in fines for misconduct since the financial crisis. | The penalty, while large, is not record breaking. In 2015, a judge ordered BNP Paribas to pay nearly $9 billion for sanctions violations. Friday’s fine is not even the largest against Wells Fargo. In 2012, when the country’s five largest banks paid a total of $26 billion to state and federal authorities to settle investigations into their mortgage lending practices in the years leading up to the 2008 financial crisis, Wells Fargo’s portion was $5.35 billion. Including Friday’s penalty, the bank has paid more than $18 billion in fines for misconduct since the financial crisis. |
| Wells Fargo’s profits last year totaled nearly $20 billion. | |
| Senior Justice Department officials told journalists in a briefing on Friday that the bank’s payments to other authorities, including $1 billion in fines to the Office 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. | Senior Justice Department officials told journalists in a briefing on Friday that the bank’s payments to other authorities, including $1 billion in fines to the Office 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. |
| The practices for which Wells Fargo is being punished in the current deal — which includes an admission by the bank that it falsified banking records — are not the only misbehavior the bank has revealed since 2016. Since they came to light in a settlement with California authorities and the Consumer Financial Protection Bureau, the bank has also admitted it charged mortgage customers unnecessary fees and forced auto loan borrowers to buy insurance they did not need. | The practices for which Wells Fargo is being punished in the current deal — which includes an admission by the bank that it falsified banking records — are not the only misbehavior the bank has revealed since 2016. Since they came to light in a settlement with California authorities and the Consumer Financial Protection Bureau, the bank has also admitted it charged mortgage customers unnecessary fees and forced auto loan borrowers to buy insurance they did not need. |
| Those matters are not part of Friday’s deal, and Justice Department officials declined to comment on whether they intended to take more action against the bank. | Those matters are not part of Friday’s deal, and Justice Department officials declined to comment on whether they intended to take more action against the bank. |
| Wells Fargo is still under investigation by the consumer bureau over its practice of abruptly closing customers’ accounts, and has said in regulatory filings that the authorities are looking into improper fees it charged wealth management customers. | Wells Fargo is still under investigation by the consumer bureau over its practice of abruptly closing customers’ accounts, and has said in regulatory filings that the authorities are looking into improper fees it charged wealth management customers. |
| Friday’s deal is also unrelated to a continuing criminal investigation of former Wells Fargo executives’ individual roles in the sales practices scandal. On Jan. 23, the Office of the Comptroller of the Currency fined former top executives millions of dollars each for overseeing the bank while it abused customers. A former Wells Fargo chief executive, John G. Stumpf, agreed to pay $17.5 million, while others are fighting the cases brought by the regulator. One of them, Carrie L. Tolstedt, Wells Fargo’s former head of retail banking, faces a $25 million fine. | Friday’s deal is also unrelated to a continuing criminal investigation of former Wells Fargo executives’ individual roles in the sales practices scandal. On Jan. 23, the Office of the Comptroller of the Currency fined former top executives millions of dollars each for overseeing the bank while it abused customers. A former Wells Fargo chief executive, John G. Stumpf, agreed to pay $17.5 million, while others are fighting the cases brought by the regulator. One of them, Carrie L. Tolstedt, Wells Fargo’s former head of retail banking, faces a $25 million fine. |
| Justice Department officials said the settlement also did not include similar conduct that fell outside the 14-year period. | Justice Department officials said the settlement also did not include similar conduct that fell outside the 14-year period. |
| In early 2018, the Federal Reserve imposed growth restrictions on Wells Fargo that will be lifted only after the bank has shown its regulators that it has made significant changes to prevent bad behavior like the fake account scandal. Since taking over in October, Mr. Scharf has not offered any hints about when that goal might be accomplished. |