Feds missed red flags in Wells Fargo case, report says
The nation’s top banking regulator identified problems with Wells Fargo’s sales practices as far back as 2010 but failed to take timely action to halt the abuses that ultimately exploded in scandal six years later, a new government report says.
Compiled by two divisions of the Office of the Comptroller of the Currency, the internal report posted online Wednesday said the federal regulator “missed opportunities” to launch an earlier and deeper investigation of complaints that Wells Fargo sales incentives pushed employees to open accounts that may not have been approved by customers.
Nonetheless, it wasn’t until September 2016 that the OCC, the Consumer Financial Protection Bureau and Los Angeles city attorney’s office hit Wells Fargo with $185 million in fines for secretly opening more than 2 million deposit and credit card accounts without customer approval. An estimated 5,300 employees were fired during a five-year period for their involvement with the practices.
There were multiple red flags and missed signals for years at the OCC, the bank’s main regula- tor, the report said. Most tellingly, bank examiners were aware of approximately 700 whistle-blower complaints related to “gaming of incentive plans” when they met with senior managers of the San Francisco-based bank in January 2010, the report said.
Carrie Tolstedt, who at the time headed the community banking division that was ground zero for the scandal was dismissive of the complaints, attributing them to a corporate culture that encouraged valid claims “which are then investigated and appropriately addressed,” the report said. Tolstedt said the bank’s sales incentive programs were capped at 10% to 20% of bank workers’ total compensation “to keep motivation in check.” Tolstedt no longer works for the bank and has had to give back millions in compensation in connection with her role in the scandal.
Also, Wells Fargo’s board of directors received regular reports dating to 2005 indicating the highest volume of internal ethics complaints at the bank involved “sales integrity violations.” The OCC’s Wells Fargo team received the same reports as early as 2010.