Three former high-level Wells Fargo executives may be forced to pay millions of dollars in penalties after a judge assigned them significant culpability for the bank's fake-accounts scandal.
The three executives will be ordered to pay a combined $18.5 million in civil money penalties if the judge's recommendations are adopted by acting Comptroller of the Currency Michael Hsu. In addition, both Julian and Russ Anderson would be banned from working in the banking industry.
The recommendations are largely in line with the penalties that were sought by the Office of the Comptroller of the Currency during a months-long civil hearing that ended in January. The agency alleged that the three former executives did not perform their duties and responsibilities adequately, and that their failures contributed to systemic problems at the bank.
A spokesperson for the OCC, which is the primary regulator of Wells Fargo's bank subsidiary, declined to comment on the recommendations.
Lawyers for the three former Wells executives indicated that they plan to continue fighting the OCC. The defendants will have the opportunity to ask a federal appeals court to review whatever penalties get assessed.
"We are very disappointed by the decision but not surprised by it," Matthew Martens, an attorney for Julian, said Wednesday in a statement. "As we have said from the outset, Mr. Julian is being scapegoated, and he has yet to receive a fair hearing on the merits. We plan to challenge what we view as a deeply flawed decision and are confident of our prospects on appeal."
Timothy Crudo, a lawyer for McLinko, said in a separate statement: "Mr. McLinko did not engage in any misconduct. Despite the unfairness that has pervaded this proceeding, we are confident that ultimately he will prevail."
Brett Kelley, a lawyer for Russ Anderson, said that his client strongly disagrees with the judge's recommended findings. "Many irregularities and errors permeated the administrative proceedings that rendered the hearing fundamentally unfair," Kelley said in an email. "In the end, we expect Ms. Russ Anderson to be vindicated."
The hearing, which began in September 2021, featured hundreds of hours of testimony about the fake-accounts scandal. The testimony focused on the period between October 2013, when The Los Angeles Times first reported on Wells Fargo's firing of employees who were accused of cheating on their sales goals, and late 2016, when regulators first penalized the bank.
Witnesses at the hearing included Pat Callahan, a former chief administrative officer at Wells Fargo; Tanya Smith, who was once the OCC's examiner in charge of Wells Fargo; and the three defendants.
The OCC has also sought to collect $25 million in penalties from Carrie Tolstedt, the onetime head of Wells Fargo's retail banking unit, known as the Community Bank. But Tolstedt, who has simultaneously been facing civil charges by the Securities and Exchange Commission, was not included in this hearing.
Numerous other former top executives at Wells Fargo settled with the OCC rather than contest its allegations. Those individuals include former CEO John Stumpf, who agreed to a $17.5 million penalty and a ban from the banking industry; former General Counsel James Strother, who agreed to pay $3.5 million; and former human resources Director Hope Hardison, who settled for $2.25 million.
For its own part,
Wells Fargo's current chief executive, Charlie Scharf, has decried the conduct of former executives who came into the OCC's crosshairs, describing it as inconsistent with the values on which the company was built.
When the OCC brought civil charges against individual executives in 2020, it originally sought a $5 million penalty from Russ Anderson, $2 million from Julian and $500,000 from McLinko.
But the following year,
In the report made public on Wednesday, the administrative law judge recommended monetary penalties of those same amounts. And on one particular matter, McNeil went beyond what the OCC was seeking. He recommended that Julian be banned from banking, citing what he described as inculpatory evidence that emerged after the OCC brought charges.
The 78-page document released Wednesday is a summary of three reports containing recommendations, which were sealed by the administrative law judge until Dec. 30.
Crudo, the lawyer for McLinko, expressed disappointment over the public release of the summary document, saying that the confidentiality of the underlying documents prevents him from commenting on either the sealed documents or the summary.
