Wells Fargo & Co has agreed to pay $3 billion to resolve criminal and civil probes into fraudulent sales practices and has admitted to pressuring employees in a fake-accounts scandal, U.S. officials said on Friday (February 22), wrapping up one of the last major investigations looming over the bank.
Wells Fargo will pay the penalties to the U.S. Justice Department and Securities and Exchange Commission and enter into a three-year deferred prosecution agreement during which the San Francisco-based bank will continue to cooperate with any ongoing government investigations, Justice Department officials said.
As part of the deal, Wells Fargo admitted that between 2002 and 2016 it pressured employees to meet “unrealistic sales goals that led thousands of employees to provide millions of accounts or products to customers under false pretenses or without consent, often by creating false records or misusing customers’ identities,” the department said in a statement.
In a statement, Charles Scharf, Wells Fargo’s new chief executive, described the past conduct as “reprehensible.” Wells Fargo is the fourth-largest U.S. lender.
“This case illustrates a complete failure of leadership at multiple levels within the bank. Simply put, Wells Fargo traded its hard-earned reputation for short-term profits, and harmed untold numbers of customers along the way,” Nick Hanna, U.S. attorney for the Central District of California, said in a statement.
Top managers within Wells Fargo’s Community Bank division were aware of the “unlawful and unethical” practices as early as 2002, and many of the practices were referred to as “gaming” within the bank, the Justice Department said.
The agreement resolves the civil and criminal liability regarding Wells Fargo’s fake-accounts scandal.
About $500 million of the penalties will go to the SEC to be distributed to investors to settle charges that the bank committed fraud by misleading investors about its sales practices, an SEC official said on a call with reporters about the resolutions settlement.
Settling the multi-agency investigation marked an important milestone for Scharf, who joined the company from BNY Mellon in September shortly after the third anniversary of the scandal.
U.S. Senator Elizabeth Warren, who is seeking the Democratic nomination to challenge Republican President Donald Trump in the Nov. 3 election, wrote on Twitter, “This is a small step in the right direction, but it’s not a substitute for holding senior executives individually accountable – and bringing criminal charges against them if the evidence justifies it.”
(Production: Deborah Gembara)