Wells Fargo pays $3 billion to settle fake-account probe

Wells Fargo & Co. will pay $3 billion to settle U.S. investigations into more than a decade of widespread consumer abuses under a deal that lets the scandal-ridden bank avoid criminal charges. The deferred-prosecution agreement with the Department of Justice spares the company a potential conviction that can create serious complications for banks, if it cooperates with continuing probes and abides by other conditions for three years. The accord also resolves a complaint by the Securities and Exchange Commission. Investigators found Wells Fargo’s overly aggressive sales targets led thousands of employees to open millions of bogus accounts for customers and foist other products on them from 2002 to 2016, often by creating false records or misappropriating their identities, the Justice Department said Friday. That generated millions of dollars in fees and interest and in some cases damaged customers’ credit ratings. “Our settlement with Wells Fargo, and the $3 billion criminal monetary penalty imposed on the bank, go far beyond ‘the cost of doing business,’” U.S. Attorney Andrew Murray for the Western District of North Carolina said in a statement. “They are appropriate given the staggering size, scope and duration of Wells Fargo’s illicit conduct.” The long-anticipated settlement marks the largest yet from a series of scandals that claimed two chief executive officers and fueled billions of dollars in operating losses tied to legal costs. The San Francisco-based bank already set aside more than $3 billion for legal matters in the latter half of 2019. The New York Times reported earlier Thursday that a settlement was imminent. The accords are another step in efforts by CEO Charlie Scharf, who took over in October, to turn around the lender as he conducts a review of all operations. Still, the firm remains under a growth cap imposed by the Federal Reserve. And last month the Office of the Comptroller of the Currency announced civil charges against eight former senior executives, some of whom settled. “The conduct at the core of today’s settlements -- and the past culture that gave rise to it -- are reprehensible and wholly inconsistent with the values on which Wells Fargo was built,” Scharf said in a statement Friday, outlining steps the bank has taken to reform over the past three years. The scandals erupted in 2016, when the bank conceded that employees may have opened millions of fake accounts to meet sales goals. The company’s expenses surged as additional lapses, abuses and wrongdoing surfaced across business lines including mortgages and auto lending. In some cases, the bank wrongly forced drivers into auto insurance policies. Borrowers who bought a car through Wells Fargo and let their insurance lapse could be charged for "force-place" policies. The bank enrolled about 2 million drivers into such policies and more than a quarter of those were not needed, regulators have said. While the sales abuses have been described repeatedly in earlier probes, Friday’s settlement provides yet more details on the high-pressure environment that led legions of low-level employees to break the law -- often costing them their jobs when they were caught by the firm’s internal controls. Many inside the bank referred to abusive sales practices as “gaming,” according to prosecutors. That often included misappropriating customers’ identities to open checking and savings accounts, issue debit or credit cards, or enroll people in bill-pay or remittance services, prosecutors said. Employees sometimes forged client signatures, created PIN numbers to activate cards and moved money to simulate account funding. Some staff even altered contact information to prevent customers of learning about their unauthorized accounts or receiving satisfaction surveys. Senior managers were aware of the issues as early as 2002, with one internal investigator describing it as a “growing plague” two years later, and another remarking that it was “spiraling out of control,” investigators found. Yet senior leaders in the community banking division refused to alter their sales model or ratchet down unrealistic targets. They later minimized the problems to higher-ups and the board, blaming them on rogue employees, prosecutors said. They’ve long taken a toll on Wells Fargo’s reputation and stock. The shares are down 12 percent this year, putting the price below where it was when regulators first described the abuses more than three years ago. Among other settlements, Wells Fargo has already paid more than $1 billion to federal regulators for consumer mistreatment, $575 million to 50 states and the District of Columbia and $480 million for an investor class-action lawsuit.

Wells Fargo pays $3 billion to settle fake-account probe

Featured Stories