Former Wells Fargo CEO banned and fined $17.5M

The OCC has issued a consent order of prohibition and for payment of a civil money penalty of $17,500,000 to John Stumpf, former chairman and chief executive officer of Wells Fargo Bank, N.A. The Order notes that previously, in connection with Wells Fargo Bank's sale practices misconduct problem, Stumpf has voluntarily forefeited all his unvested equity awards (valued at approximately $41 million), and his 2016 bonus and salary, and the bank had caused Stumpf to return incentive compensation valued at approximately $28 million, effectuated in part through the Bank’s non-payment of Respondent’s retirement funds, reflecting a total of approximately $70 million in equity-related forfeitures, and bonus and salary.

The Comptroller found (and Stumpf neither admits nor denies), that:

1. From at least 2002 until October 2016, Wells Fargo's Community Bank’s retail branch network had a systemic sales practices misconduct problem.
2. The root cause of the systemic sales practices misconduct was the Community Bank’s business model which imposed unreasonable sales goals on its employees along with unreasonable pressure to meet these goals. Additionally, the Community Bank’s controls were ineffective and were not reasonably designed to detect or prevent the misconduct.
3. Stumpf was or should have been aware of the problem and its root cause. During Respondent’s tenure, there was a culture in the Community Bank that resulted in systemic violations of laws and regulations, breaches of fiduciary duties, and unsafe or unsound practices by large numbers of Community Bank employees.
4. Stumpf failed to adequately supervise the Head of the Community Bank with respect to the Community Bank’s sales practices, which allowed the Community Bank’s systemic sales practices misconduct problem to continue for many years. Respondent failed to sufficiently challenge the business model of the Community Bank during his tenure as Chairman and Chief Executive Officer. Respondent neglected to adequately inform himself about the reasonableness of the sales goals and pressure in the Community Bank, the impact of those goals, and the adequacy of controls to detect and prevent sales practices misconduct.
5. Stumpf failed to respond to numerous warning signs, including many team member complaints submitted directly to his office regarding pervasive sales pressure, fear of termination for not meeting unreasonable sales goals, and illegal and unethical sales activity across the Community Bank
6. Stumpf was frequently informed by the leaders of the Community Bank, as well as leaders in the Risk, Human Resources, Audit, and Legal functions at the Bank, that the sales practices issues were the result of isolated instances of individual employee misconduct, not systemic conduct at the Community Bank, and that the controls within the Community Bank were effective and reasonably designed to detect or prevent the misconduct. Stumpf failed to ascertain that these assurances were inaccurate.
7. Stumpf remained inadequately informed about the reasonableness of sales goals and sales pressure, and the deficient controls. Respondent failed to hold the Head of the Community Bank accountable for the Community Bank’s systemic sales practices misconduct problem, even after a 2013 Los Angeles Times article reported sales practices issues in nine states, after the City Attorney of Los Angeles filed a lawsuit against the Bank in May 2015, after the OCC issued five Matters Requiring Attention in June 2015, and after outside consultants reviewed sales practices and customer harm at the Bank.
8. In his sworn testimony before the OCC, Stumpf acknowledged, based on the information presented to him during his testimony, that the Community Bank had a systemic sales practices misconduct problem from the early 2000s until October 2016, and that as CEO he ultimately bears responsibility for the Community Bank’s systemic problem. In addition to his acknowledgment in testimony before the OCC, Respondent previously took accountability for these failures by voluntarily forfeiting $41 million in unvested equity awards and his 2016 bonus and salary. In total, Respondent forfeited approximately $70 million in equity-related forfeitures, and bonus and salary.

   In addition to the order of prohibition, the consent order required that Stumpf pay a civil money penalty of $17,5 million.