The deal does not, however, remove the threat of prosecution against current and former Wells Fargo employees.
Prosecutors slammed Wells Fargo for the “staggering size, scope and duration” of the unlawful conduct uncovered at one of America’s largest and most powerful banks.
As part of the deal, Wells Fargo admitted that between 2002 and 2016, it falsified bank records, harmed the credit ratings of customers, unlawfully misused their personal information and wrongfully collected millions of dollars in fees and interest.
“Today’s announcement should serve as a stark reminder that no institution is too big, too powerful, or too well-known to be held accountable and face enforcement action for its wrongdoings,” US Attorney Andrew Murray for the Western District of North Carolina said in a statement.
Authorities said Friday that the criminal investigation into false bank records and identify theft at Wells Fargo is being resolved by what’s known as a deferred prosecution agreement. Under that agreement, authorities have agreed not to prosecute Wells Fargo for three years as long as it abides by certain conditions, including its continued cooperation with “further” government investigations.
In a statement, Wells Fargo CEO Charlie Scharf, who joined the company in September, said, “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. Our customers, shareholders and employees deserved more from the leadership of this company.”
Wells Fargo has also reached a civil settlement over its creation of false bank records with the SEC over its conduct. The $3 billion fine resolves all three investigations.
‘Remarkable’ fraudulent conduct
“The top managers of the community bank were aware of the unlawful and unethical gaming practices as early as 2002,” the settlement said.
Yet Wells Fargo executives repeatedly refused to acknowledge the shady behavior was being driven by the bank’s wildly unrealistic sales goals, which were at the heart of the company’s business model. Authorities said that senior executives at the community bank “minimized the problems” by shifting the blame to “individual misconduct instead of the sales model itself.”
“This settlement holds Wells Fargo accountable for tolerating fraudulent conduct that is remarkable both for its duration and scope, and for its blatant disregard of customers’ private information,” Michael Granston, deputy assistant attorney general at the Department of Justice’s civil division, said in the statement.
Not out of the penalty box yet
But Wells Fargo’s legal troubles are far from over.
“When bank workers started to raise alarms about Wells Fargo’s fake account scandal, managers retaliated against us,” said Killian Colin,a former Wells Fargo employee and a member of the Committee for Better Banks, in a statement. “To make matters worse, frontline employees like us were unfairly scapegoated for trying to meet intense sales pressures.
“Today’s settlement might bring some relief to consumers and workers,” he added, “but it does not relinquish Wells Fargo’s duty to change the workplace culture that fueled the disastrous scandal in the first place.”
“That’s a much bigger hurdle. That will take time,” said Gerard Cassidy, a banking analyst at RBC Capital. He expects that the asset cap and other enforcement actions against Wells Fargo won’t be completely removed until 2022.
Wells Fargo’s stock has suffered
The Justice Department and SEC said that Friday’s settlement took into account other recent fines imposed against Wells Fargo, as well as the bank’s “extensive cooperation” and efforts to repair damage done to customers.
In other words, Wells Fargo has been left in the dust.