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Former Wells Fargo CEO fined, banned from industry for life over fake accounts scandal

Austin Weinstein, The Charlotte Observer on

Published in Business News

Rather than attempting to move past the fake-accounts scandal as quick as possible, Scharf has expressed direct contrition for the bank's actions and emphasized that recovering lost trust and satisfying regulators will take substantial time.

Wells Fargo is based in San Francisco and has its largest employment base in Charlotte, where it has about 27,000 workers.

ABUSE AND THREATS

Regulators said that the root cause of the misconduct was the business model in the firm's consumer bank, which set unreasonable sales goals on purpose, and then put unreasonable pressure on employees to reach those goals. That fostered an atmosphere that "perpetuated improper and illegal conduct," the OCC said.

The practice was highly profitable for the bank's consumer wing, known as the Community Bank, and Tolstedt, its then-leader, was praised and highly compensated for the unit's success.

That success came at a cost: the pressure to meet the impossible goals led to the opening of millions of accounts in customers' names without their knowledge, among other misconduct, regulators said.

 

"The Bank tolerated pervasive sales practices misconduct as an acceptable side effect of the Community Bank's profitable sales model, and declined to implement effective controls to catch systemic misconduct," the OCC said. "Instead, to avoid upsetting a financially profitable business model, senior executives, including Respondents, turned a blind eye to illegal and improper conduct across the entire Community Bank."

Management of the consumer bank badgered and intimidated employees to meet the intentionally unattainable goals, the OCC said. Employees were subjected to "hazing-like" abuse, regulators found, and were threatened with firing or actually fired if they didn't meet the goals.

MORE LEGAL ISSUES

After widespread public outcry, the sales goals were removed in 2016. Since the revelation of the sales practices, the bank has struggled to recover. Stumpf and his successor, Tim Sloan, both resigned.

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