Wells was tipped off to government probe by OCC, watchdog says

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The top examiner of Wells Fargo at the Office of the Comptroller of the Currency improperly revealed to the San Francisco bank the existence of a government investigation, a watchdog agency’s inquiry has found.

Sometime before mid-April 2017, the OCC’s examiner-in-charge at Wells allegedly disclosed a probe by the Treasury Department’s inspector general. The specific issues under investigation and allegedly disclosed to Wells Fargo remain confidential.

As a general matter, OCC employees are not allowed to discuss a pending inspector general investigation with the subject of the probe unless they receive approval to do so.

The improper disclosure, which has not been previously reported, was described in a recent report by the Treasury inspector general’s office. The report’s findings provide new fodder for critics of the OCC, whose budget depends on assessments it levies on the banks it regulates, including Wells Fargo.

David Paul Morris/Bloomberg

Last April, the OCC acknowledged that it failed to take timely and effective supervisory actions against Wells after identifying significant issues related to the bank’s sales practices. Those problems had burst into public view seven months earlier, when the $2 trillion-asset bank acknowledged that thousands of its employees had opened as many as 2.1 million customer accounts without their permission.

This week, American Banker obtained a partially redacted copy of the inspector general’s 19-page report. The name of the OCC examiner-in-charge whose conduct was investigated is blacked out on the document.

Multiple news outlets reported on April 7, 2017, that Bradley Linskens, who previously served as the OCC’s examiner-in-charge at Wells, had been removed from that role. That same day, the OCC asked the Treasury inspector general to look into allegedly inappropriate disclosures by the OCC’s examiner-in-charge at Wells Fargo, and that request led the inspector general to open an investigation.

Linskens joined the OCC in 1993 and was named a senior national bank examiner in 2016. As examiner-in-charge for Wells Fargo, he was based in San Francisco, where he reportedly managed a team of more than 60 people. He filed a lawsuit against the OCC in May 2017 in the wake of the reports, which were anonymously sourced, that he had been removed from his post at Wells. Through an attorney, Linskens declined to comment Thursday on the inspector general’s report.

Bryan Hubbard, an OCC spokesman, confirmed that Linskens still works for the agency, but he declined to comment on the inspector general's report.

Spokesmen for Wells Fargo and the Treasury inspector general’s office, which has been headed for the last 10 years by Eric Thorson, also declined to comment for this article.

Last April, the inspector general’s office started looking into whether the release of certain information to Wells Fargo violated ethical standards that apply to bank examiners.

In addition to the disclosure of information about an inspector general probe, the OCC asked the watchdog agency to investigate whether the OCC’s examiner-in-charge at Wells Fargo disclosed information regarding the Consumer Financial Protection Bureau, the Los Angeles City Attorney’s Office and internal OCC discussions.

The previous fall, the three agencies had collaborated to hit Wells Fargo with $185 million in penalties — the first domino to fall in the $2.0 trillion-asset bank’s phony-accounts scandal.

The newly released report states that the inspector general’s office did not substantiate the allegations regarding the release of information about the CFPB, the L.A. City Attorney’s Office and the OCC.

However, the report also states that the primary reason that the allegations involving the inappropriate release of OCC information were “unsubstantiated” is that the OCC lacks “clear guidelines” specifying what can and cannot be discussed by an examiner-in-charge.

In addition, interviews conducted by the inspector general’s office indicated that similar information was being disclosed to the bank by other senior OCC employees.

The report also found that much of the alleged sensitive information that was discussed was already in the public domain at the time.

The report’s findings could breathe new life into the debate over whether bank examiners should be embedded at the banks they oversee. Critics of that practice argue that on-site examiners develop inappropriately close ties to the bankers they are charged with overseeing.

“There’s this inherent problem with having examiners at the banks, at the biggest banks. Because they tend to inevitably develop incredibly cozy relationships that can be exploited,” said Dennis Kelleher, the president of Better Markets, a Washington-based organization that advocates for strong financial regulation.

Kelleher emphasized that he was speaking in general terms, and not specifically about the situation involving the OCC and Wells Fargo.

Four years ago, in response to the argument that examiners had become too close to bank management teams, then-Comptroller of the Currency Thomas Curry announced a plan to reduce the number of resident examiners at large banks.

But newly confirmed Comptroller Joseph Otting announced in December that he was reversing his predecessor’s plan. “Upon review, it is not practical to continue the agency’s efforts to move resident examiners out of on-site locations,” Otting said in a statement at the time.