By Patrick Rucker
WASHINGTON, March 3 (Reuters) – A U.S. Justice Departmentprobe into a phony accounts scandal at Wells Fargo & Cois asking whether executives hid details from the company boardand regulators as the problem grew over years, sources familiarwith the review said.
The move carries into the Trump era an investigation startedunder the Obama administration, and could result in criminalcharges against bank employees involved.
The Justice Department this week was due to interviewfederal bank examiners in Charlotte, North Carolina, and askwhether low-level employees broke the law by opening accountswithout customer knowledge and if company executives took partin a conspiracy. A grand jury convened in the Northern Districtof California has also sent subpoenas to witnesses, includingformer Wells Fargo employees, the sources said.
The third-largest U.S. lender on Wednesday said even morecustomers may have been affected by the scandal than previouslybelieved.
Wells Fargo disclosed in a $190 million settlement withregulators in September that staff opened as many as 2.1 millionchecking, savings and credit card accounts without customerconsent over several years to satisfy managers’ demands.
The sources declined to be identified because they were notauthorized to speak about an open investigation. A bankspokesperson declined to comment on account-related probes butsaid Wells Fargo is trying to move past the scandal.
Officials are seeking to find out if executives sharedeverything they knew about the phony accounts to the Wells Fargoboard of directors and the Office of the Comptroller of theCurrency, the lead regulator for national banks.
Even if executives are not charged with criminal misconduct,they could face civil penalties including fines or a ban fromthe banking industry. Wells has already fired some executivesand clawed back portions of their pay.
Wells CEO John Stumpf resigned after the accounts scandalbroke and former chief of retail banking Carrie Tolstedtretired. The bank has fired four mid-level executives andthousands of lower level employees.
Officials will decide what charges to bring once the JusticeDepartment finishes its investigation, work that is expected towrap later this year, depending on how quickly Justice attorneyscan proceed.
The assistant U.S. attorney leading the Wells Fargo case inSan Francisco is busy preparing an unrelated criminal case tiedto Hewlett Packard’s $11 billion buyout of Autonomy Corp.
OPEN CASE
To be sure, Wells faces a slew of other investigations fromindividual states, agencies and U.S. Congress, though criminalcharges are what could rock Wells Fargo.
Wells told investors in an annual securities filing onWednesday that its legal costs could exceed what it has setaside by as much as $1.8 billion.
“We remain focused on providing the accountability andoversight that customers, team members, and investors expect anddeserve,” Wells Fargo spokeswoman Jennifer Dunn said.
The U.S. Securities and Exchange Commission’s Philadelphiaoffice, meanwhile, wants to know whether Wells Fargo misledinvestors by inflating the tally of customers who soughtmultiple accounts and whether the bank wrongfully went afterwhistleblowers, according to a person familiar with the matter.
U.S. Representative Jeb Hensarling, the Texas Republican atthe head of the House Financial Services Committee, in Septembersummoned four Wells Fargo executives for interviews andthreatened to subpoena others, though that review is expected toconclude quietly in the face of the criminal investigations.
A separate review by the Wells Fargo board of directors isexamining how the company handled the phony accounts spree thatit first believed went on for four years from mid-2011 but mayhave gone on longer. A report on those findings is due by earlyApril, Wells Fargo has said.
Several states, including Connecticut and Florida, haveactive investigations into the bank. California issued a searchwarrant for Wells Fargo’s corporate offices in October, butdeclined to comment on the status of its review.
The Labor Department is separately examining whether thebank responded as it should have to whistleblowing bank tellers. (Dan Levine contributed from San Francisco, Sarah N. Lynchcontributed from Washington, Karen Freifeld and Dan Freedcontributed from New York; Editing by Linda Stern and MeredithMazzilli)
Source: wealthmanagement.com
