For years, as Wells Fargo secretly set up millions of fake bank and credit card accounts without customers’ consent, the bank’s federal regulator was learning of hundreds of whistle-blower complaints against the company for its sales tactics.
But that regulator, the Office of the Comptroller of the Currency, did not act.
In a damning, 15-page report published on Wednesday, the Office of the Comptroller of the Currency admitted that its oversight of Wells Fargo was “untimely and ineffective.” The report said the agency failed to spot clues that would have allowed it to connect the dots in one of the most brazen banking scandals of the recent past.
Since 2005, Wells Fargo’s board had received regular notifications indicating that “the highest level” of ethics line complaints and employee firings were related to sales integrity violations, according to the report. It also said that even though the regulating agency started receiving those reports around early 2010, there was no evidence that it adequately followed up on those concerns.
And even after the regulator confronted a Wells Fargo executive in 2010 about 700 cases of whistle-blower complaints, the regulator did not require the bank to provide adequate analysis, according to the report, which was issued by the comptroller’s office of enterprise governance and its ombudsman.
The Office of the Comptroller of the Currency recently removed its top Wells Fargo examiner, Bradley Linskens, from a position in which he led 60 regulatory supervisors.
The regulating agency’s review follows a similarly harsh report from a panel of Wells Fargo’s board members, published last week, that identified red flags that should have indicated that something was awry years ago. An increasing number of customers seemed to be opening accounts without ever making a deposit, for instance. And as early as 2004, a manager with Wells Fargo’s internal investigations group noticed the so-called sales gaming cases, in which bankers tinkered inappropriately with customer accounts, had risen to about 680 in 2004, from 63 in 2000.
Timothy J. Sloan, the chief executive of Wells Fargo, discussed the aftermath in an interview on Wednesday, saying, “We had to fundamentally change how we are organized.”
Mr. Sloan added that last week’s report was “incredibly difficult to read” because of “the very direct criticism of a company that I care a lot about.” Some of the facts unearthed in the report “were new to me,” he said.
The report placed the brunt of the blame on John G. Stumpf, who was Mr. Sloan’s predecessor as chief executive, and Carrie L. Tolstedt, who ran the bank’s branch network. Mr. Sloan said the report offered “a very fair description of John — it pointed out some of his strengths, and it pointed out some of the mistakes that he made.”
Ms. Tolstedt, who was initially allowed to retire but was later fired, refused to be interviewed by the board’s investigators and disputed the report’s conclusions. Mr. Sloan said he thought the report offered a “fair description of her management style” and added, “Maybe if she had made herself available, the report would have been a bit different.”
The federal regulator’s report said that in 2010, the agency asked Ms. Tolstedt about the whistle-blower cases, but she played down the issue, attributing the high volume of cases to a culture that “encourages valid complaints, which are then investigated and appropriately addressed.”
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