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Feds in­ves­ti­gat­ing Wells Fargo

Com­pany hit with $185M in fines last week

- Kevin Johnson and Kevin McCoy @bykev­inj, @km­c­coynyc USA TO­DAY Business · Crime · U.S. News · White-collar Crime · Fraud · Banking · Wells Fargo · Philadelphia Union · University of Miami · United States of America · United States District Court for the Southern District of New York · New York · York, ME · California · San Francisco · Francisco · New York City · York City F.C. · Preet Bharara · United States Consumer Financial Protection Bureau · Los Angeles · JPMorgan Chase · Chase

Amid na­tional crit­i­cism over im­proper sales prac­tices that trig­gered $185 mil­lion in fines, Wells Fargo now faces in­ves­ti­ga­tion by fed­eral pros­e­cu­tors.

The U.S. At­tor­ney’s Of­fices for the South­ern Dis­trict of New York and the North­ern Dis­trict of Cal­i­for­nia are in the first stages of an ex­am­i­na­tion that even­tu­ally could re­sult in fed­eral court ac­tion, a U.S. of­fi­cial fa­mil­iar with the mat­ter said Wed­nes­day, con­firm­ing an ini­tial re­port by The

Wall Street Jour­nal.

The of­fi­cial, who char­ac­ter­ized the ac­tion as a pre­lim­i­nary re­view to de­ter­mine if there is a crim­i­nal or civil case to pur­sue, spoke on con­di­tion of anonymity be­cause the mat­ter has not been pub­licly dis­closed.

The in­ves­ti­ga­tion comes a week af­ter Wells Fargo, one of the na­tion’s largest banks, was hit with $185 mil­lion in civil penal­ties for se­cretly open­ing mil­lions of unau­tho­rized de­posit and credit card ac­counts that harmed thou­sands of cus­tomers.

Dur­ing a five-year pe­riod, the bank fired roughly 5,300 em­ploy­ees and man­agers for open­ing the ac­counts with­out cus­tomers’ knowl­edge or ap­proval as part of a bid to meet sales tar­gets, Wells Fargo con­firmed.

Rep­re­sen­ta­tives of the San Fran­cisco-based bank­ing gi­ant did not re­spond to a mes­sage seek­ing com­ment. The New York City of­fice of U.S. At­tor­ney Preet Bharara de­clined to com­ment. Abra­ham Sim­mons, a spokesman for the San Fran­cisco of­fice of U.S. At­tor­ney Brian Stretch, said he could nei­ther con­firm nor deny the ex­is­tence of an in­ves­ti­ga­tion.

Wells Fargo shares closed down nearly 1% at $46.52 Wed­nes­day.

Last week’s fines were im­posed un­der set­tle­ments Wells Fargo reached with the Consumer Fi­nan­cial Pro­tec­tion Bureau, the Of­fice of the Comptrolle­r of the Cur­rency and the Los An­ge­les city at­tor­ney’s of­fice.

The CFPB has le­gal au­thor­ity to re­fer the find­ings to fed­eral pros­e­cu­tors. David May­orga, a spokesman for the reg­u­la­tor, said Wed­nes­day he could not dis­cuss whether such a re­fer­ral had been made.

Wells Fargo nei­ther ad­mit­ted nor de­nied last week’s civil find­ings, and no top ex­ec­u­tives were pe­nal­ized. CEO John Stumpf said the bank had no im­proper sales in­cen­tives and blamed em­ploy­ees for the unau­tho­rized ac­counts,

The Wall Street Jour­nal re­ported Wed­nes­day.

How­ever, me­dia or­ga­ni­za­tions have re­ported that Car­rie Tol­st­edt, the bank ex­ec­u­tive who over­saw the unit that cre­ated the unau­tho­rized ac­counts, is re­tir­ing from Wells Fargo with a golden para­chute pack­age of ben­e­fits worth $124.6 mil­lion.

As public ques­tions and crit­i­cism of the bank’s con­duct mounted this week, many in­vestors sold. Wells Fargo this week lost the ti­tle as the most valu­able U.S. bank for the first time in three years. The com­pany now ranks sec­ond be­hind JPMor­gan Chase.

Wells Fargo on Tues­day said it would end bank­ing prod­uct sales goals in De­cem­ber in a bid to re­build cus­tomer con­fi­dence.

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