When big companies do wrong, it’s rarely the big boss who pays the price.
But on Thursday, Wells Fargo’s former chief executive John G. Stumpf was fined $17.5 million — the largest individual fine in the history of the bank’s main federal regulator — for his role in a toxic sales culture that foisted unwanted products and sham bank accounts on millions of customers.
In settlements with the Office of the Comptroller of the Currency, Stumpf also agreed to a lifetime ban from the banking industry, and two other former senior Wells Fargo executives — a chief risk officer and a chief administrative officer — agreed to lesser fines and restrictions on their work in the industry. Five others, including a former head of Wells Fargo’s retail banking operations, were also charged by the regulator.
In a damning 100-page legal filing, the agency offered fresh details about the bank’s relentless pressure on employees to meet its unrealistic goals, which included “hazing-like abuse.” Many employees said they felt they had only two options: Cheat or get fired.
Employees at one branch said they had been told to hit their targets or they would be “transferred to a store where someone had been shot and killed.” A veteran of the 1991 Persian Gulf war wrote in a letter to Stumpf that he had found his time in a war zone less stressful than working at Wells Fargo. From 2011 to 2016, the bank fired more than 8,000 people for sales records it deemed subpar.
“The bank had better tools and systems to detect employees who did not meet unreasonable sales goals than it did to catch employees who engaged in sales practices misconduct,” the regulator said in legal filings that contained a number of redactions.
The settlements were a rare instance of personal consequences for those at the highest echelons of the banking industry. Even though the biggest American banks paid billions of dollars to settle civil cases stemming from their mortgage activities in the lead-up to the 2008 financial crisis, their chief executives have not given up a penny to federal bank regulators.
Stumpf’s fine, while record setting, is not the largest penalty being sought by the regulator in the case. It wants to impose a $25 million fine on one of his subordinates: Carrie L. Tolstedt, Wells Fargo’s former head of retail banking.
Stumpf, in a sworn statement to the Office of the Comptroller of the Currency, blamed Tolstedt and others for what he acknowledged was “systemic” misconduct throughout the bank. A 2017 investigation by Wells Fargo’s board blasted Tolstedt for creating a sales culture that fostered fraud, and Stumpf for turning a blind eye to it.
Tolstedt, who left the bank in 2016, is fighting the regulator’s civil charges. Her lawyer, Enu Mainigi, said in a statement that Tolstedt had “acted with the utmost integrity” and would be vindicated by “a full and fair examination of the facts.”
Wells Fargo’s conduct erupted into public view in late 2016, setting off a crisis that continues to reverberate more than three years later. Stumpf, the bank’s chief executive since 2007, was quickly ousted. His successor, Timothy Sloan, resigned last year after failing to quell the bank’s turmoil.
Months before the bank’s troubles became public, Stumpf exercised all of his vested stock options, turning them into shares worth tens of millions of dollars that he owned outright. Wells Fargo later clawed back his unvested stock awards and some of his retirement payout, costing him $69 million but still leaving him in possession of an enviable fortune.
Further repercussions are still possible for Wells Fargo’s former leaders: The Justice Department is continuing an investigation.
Even if Thursday’s fines are the last word in regulatory action, they were an unusual flexing of federal enforcement at the highest reaches of banking.
JPMorgan Chase’s chief executive, Jamie Dimon — the longest tenured of the big bank leaders — has weathered scandals like the $6 billion trading loss brought about by a trader nicknamed the London Whale and a money-laundering case related to Ponzi schemer Bernard Madoff. Two former traders for the bank have faced criminal charges, and the bank as a whole has paid nearly $44 billion in penalties since the financial crisis, but none of the enforcement actions against the bank have been directed at Dimon personally.
Bank of America has paid $76 billion in fines since the crisis — the most by any bank — but its chief executive during the 2008 panic, Kenneth Lewis, shelled out zero dollars to federal regulators despite presiding over the bank’s abuses of mortgage borrowers and its acquisition of the mortgage lender Countrywide Financial, another abuser. He did pay a $10 million fine, but that was the result of a settlement with New York state prosecutors.
The Office of the Comptroller of the Currency said the eight Wells Fargo executives had “failed to adequately perform their duties and responsibilities” and contributed to problems that stretched back more than a decade.
Wells Fargo’s new chief executive, Charles Scharf, said in a memo to employees Thursday that the bank would stop all payments to the former executives, if any were pending.
“This was inexcusable. Our customers and you all deserved more from the leadership of this company,” wrote Scharf, who joined Wells Fargo in October. “We are reviewing today’s filings and will determine what, if any, further action by the company is appropriate.”