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Ex-Wells Fargo execs square off with U.S. regulator in trial over phony account scandal

Reuters logo Reuters 2021-09-13 By Jody Godoy and Chris Prentice
a close up of a sign: FILE PHOTO: A Wells Fargo logo is seen in New York City © Reuters/Stephanie Keith FILE PHOTO: A Wells Fargo logo is seen in New York City

By Jody Godoy and Chris Prentice

WASHINGTON (Reuters) -The trial of three former Wells Fargo & Co employees over their alleged roles in a scandal involving phony accounts kicked off on Monday, a rare public confrontation between a top U.S. banking regulator and former high-level bank executives.

The Office of the Comptroller of the Currency (OCC) is squaring off against executives it says are partly culpable for the San Francisco lender's misconduct before an in-house OCC judge in Sioux Falls, South Dakota, in a hearing expected to last at least two weeks.

The OCC alleges that Wells Fargo's former risk officer Claudia Russ Anderson, former chief auditor David Julian and former executive audit director Paul McLinko failed to adequately perform their duties and responsibilities, contributing to Wells Fargo's "systemic sales practices misconduct" from 2002 to 2016.

The regulator brought civil charges last year against the trio, as well as other former Wells Fargo executives, and has demanded they pay nearly $19 million combined to settle the matter. The OCC is also seeking to bar Russ Anderson from the banking industry over allegations of outright law and regulation violations.

The proceedings mark a significant milestone for a regulator that has been criticized in the past for being too soft on both banks and industry executives.

The long-running scandal over Wells Fargo's pressurized sales culture that led staff to open millions of unauthorized or fraudulent customer accounts has cost the bank billions of dollars in civil and criminal penalties and has badly damaged its reputation.

Wells Fargo's "incentive sales program was implemented without risk-management controls, without proactive monitoring and it essentially incented the bank employees to open fraudulent accounts, to provide misleading information to customers, resulting in significant harm to the customers and to the reputation of the bank," said Greg Coleman, OCC's senior deputy comptroller for large bank supervision and the first witness to testify at the hearing.

Russ Anderson as the community bank division's chief risk officer and McLinko and Julian as audit executives represented key lines of defense against misconduct, the OCC official said.

Attorneys for the trio did not respond to requests for comment but an attorney representing Julian raised potential issues of bias and credibility of government examiners in the opening hours of the hearing, hinting at a potential defense strategy.

A spokesperson for Wells Fargo declined to comment beyond a January 2020 statement in which CEO and President Charlie Scharf said the OCC's actions were consistent with holding the firm and individuals accountable for "inexcusable" sales practices issues.

(Reporting by Jody Godoy and Chris Prentice; Editing by Michelle Price, Peter Cooney and Mark Porter)


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