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Wells Fargo to Pay $3B in Settlement   02/22 09:49

   Wells Fargo agreed Friday to pay $3 billion to settle criminal and civil 
investigations into a long-running practice whereby company employees opened 
millions of unauthorized bank accounts in order to meet unrealistic sales 
goals. 

   LOS ANGELES (AP) -- Wells Fargo agreed Friday to pay $3 billion to settle 
criminal and civil investigations into a long-running practice whereby company 
employees opened millions of unauthorized bank accounts in order to meet 
unrealistic sales goals. 

   Since the fake-accounts scandal came to light in 2016, Wells has paid out 
billions in fines to state and federal regulators, reshuffled its board of 
directors and seen two CEOs and other top-level executives leave the company. 
Wells Fargo's reputation has never fully recovered from the sales scandal, even 
four years later. 

   The $3 billion payment includes a $500 million civil payment to the 
Securities and Exchange Commission, which will distribute those funds to 
investors who were impacted by Wells' behavior.

   "Wells Fargo traded its hard-earned reputation for short-term profits" said 
U.S. Attorney Nick Hanna for the Central District of California.

   Before the scandal broke, Wells Fargo was considered to have a sterling 
reputation among the big banks. Bank executives referred to its branches as 
"stores," and once had a policy of trying to get each Wells Fargo customer to 
have eight financial products with the company.

   Behind the scenes, Wells' top management was pushing sales goals that were 
both aggressive and unrealistic. Bank employees were berated for not making 
bloated quotas, leading sometimes to mental health breakdowns, and ultimately 
resulting in many employees gaming Wells Fargo's sales system in order to meet 
the targets. For example a number of Wells Fargo customers, notably the 
elderly, were signed up for online banking when they did not have internet 
access.

   The behavior by Wells' employees caused damage to customers' credit scores 
and cost some of them money in fees.

   The documents that lay out the charges against Wells Fargo lean heavily on 
the behavior of "Executive A," described as the head of Wells' community bank 
business and the regional bank division from 2002 until 2017. Carrie Tolstedt 
held those positions during that time period. Tolstedt was aware of employees 
using fraudulent means to achieve sales goals as early as 2004, according to 
the DOJ. 

   "I just want (Executive A) to be constantly aware of this growing plague," 
one Wells Fargo executive wrote in a 2004 email.

   "Ms. Tolstedt acted appropriately and in good faith at all times, and the 
effort to scapegoat her is both unfair and unfounded," said Enu Mainigi, a 
lawyer for Tolstedt. 

   The settlement with the Department of Justice covers Wells Fargo as a 
company, and the DOJ could still go after individuals for violating bank laws. 
The Office of the Comptroller of the Currency, one of the nation's bank 
regulators, fined several of Wells' former top executives earlier this year for 
their role in the scandal. 

   Former CEO John G. Stumpf was fined $17.5 million and agreed to a lifetime 
ban from the banking industry. The OCC sued Tolstedt for $25 million for her 
role in the scandal, a suit that Tolstedt's lawyers have said they intend to 
fight. 

   Current Wells Fargo CEO Charlie Scharf, who started the job only a few 
months ago, has staked his early reputation on resolving all of the bank's 
legal questions. He has been blunt in saying that what the bank did under 
previous management was unacceptable. 

   "The conduct at the core of today's settlements --- and the past culture 
that gave rise to it --- are reprehensible and wholly inconsistent with the 
values on which Wells Fargo was built," Scharf in a statement.

   Despite Scharf's comments, Wells' problems are far from over. 

   San Francisco-based Wells Fargo remains under probation with the Federal 
Reserve, which has restricted the bank's ability to grow assets or expand until 
the Fed believes Wells has solved all of its culture problems. That probation, 
which started two years ago, was only expected to last a year and there are no 
signs that it will end soon.

   Further, the $3 billion settlement doesn't resolve the bank's problems 
related to auto insurance and mortgages, which happened in the years following 
the sales practices scandal. Those issues remain under investigation by state 
and federal authorities.

   The House Financial Services Committee, meanwhile, said Friday that it will 
hold two days of hearings next month at which it will announce the findings of 
its investigation into the bank's compliance with regulatory orders issued in 
the wake of the fake accounts scandal. Scharf and other top executives are due 
to appear at the hearings, the committee said. 

   "Despite today's settlement, these hearings and the Committee's 
investigation will make clear that the problems at Wells Fargo remain 
unresolved," Committee Chairwoman Maxine Waters, D-Calif., said.


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