https://www.bankingdive.com/news/occ-judge-recommends-185m-in-fines-for-3-ex-wells-fargo-execs/638340/
OCC judge recommends $18.5M in fines for 3 ex-Wells Fargo execs
The penalties, including a lifetime ban for one, are in line with what the agency had sought. The judge suggested a second lifetime ban. The OCC has 90 days to issue a final decision.
Published Dec. 8, 2022
By Rajashree Chakravarty
Reporter
Wells Fargo branch exterior
Courtesy of Wells Fargo multimedia resources
Three former Wells Fargo executives should pay $18.5 million in fines over their alleged roles in the bank’s 2016 fake-accounts scandal, an in-house judge for the Office of the Comptroller of the Currency (OCC) recommended in a decision released Wednesday.
Christopher McNeil, an administrative law judge, said there was enough evidence to recommend fines of $10 million for Claudia Russ Anderson, the bank’s former community bank group risk officer; $7 million for David Julian, Wells’ former chief auditor; and $1.5 million for Paul McLinko, the bank’s former executive audit director. That’s in line with penalties the OCC has sought since at least September 2021.
The judge also recommended Julian and Russ Anderson be banned from working in the banking sector, and that McLinko be given a personal cease-and-desist order.
The OCC had sought a permanent ban for Russ Anderson as of last year but not necessarily for Julian. McNeil said Julian’s actions also warranted a ban based on “inculpatory evidence” the agency didn’t have when it issued its enforcement action on the matter.
Julian, Russ Anderson and McLinko will get 30 days to contest McNeil’s recommendations, while the OCC’s acting chief, Michael Hsu, will have 90 days to issue his final decision.
Lawyers for the three former executives plan to continue contesting the agency’s actions and apply for a federal appeals court’s review, American Banker reported.
Matthew Martens, an attorney for Julian, said he was disappointed but not surprised by the decision in a statement seen by American Banker and Law360.
“As we have said from the outset, Mr. Julian is being scapegoated, and he has yet to receive a fair hearing on the merits,” Martens said. “We plan to challenge what we view as a deeply flawed decision and are confident of our prospects on appeal.”
Brett Kelley, a lawyer for Russ Anderson, said he was “prohibited from commenting” on the recommendations, which are under seal until Dec. 30.
“Many irregularities and errors permeated the administrative proceedings that rendered the hearing fundamentally unfair,” Kelley said. “In the end, we expect Ms. Russ Anderson to be vindicated.”
Timothy Crudo, a lawyer for McLinko, maintained that the former executive “did not engage in any misconduct, and we are confident that ultimately he will prevail.”
Wells Fargo has paid more than $5 billion in fines and legal settlements related to its 2016 fake-accounts scandal.
Julian, Russ Anderson and McLinko, between 2013 and 2016, “separately and collectively engaged in unsafe or unsound banking practices by individually failing to identify and effectively address inadequate controls over known issues of risks related to sales goals pressure in the Community Bank,” McNeil’s 78-page decision asserted.
The executives purposefully avoided escalating the issues and misled the regulators “regarding the efficacy of controls over risks related to sales goals pressure,” he wrote.
Russ Anderson, in particular, “materially contributed” damage to Wells Fargo’s reputation through an “utter lack of attention,” McNeil wrote.
“By concealing the true nature and scope of sales practices misconduct ... and by failing to implement meaningful and effective controls to detect and prevent such misconduct, respondent Russ Anderson delayed an effective response to the problem, and contributed to conditions that led to losses by the bank,” the judge wrote.
Several former Wells Fargo executives have settled with the OCC in connection with fallout from the bank’s 2016 scandal. Former CEO John Stumpf in 2020 agreed to a $17.5 million penalty and a ban from the industry. Former General Counsel James Strother agreed to pay $3.5 million. The bank’s former chief administrative officer, Hope Hardison, and former chief risk officer, Michael Loughlin, have settled charges totaling the same amount, collectively.
The OCC has also sought $25 million in penalties against Carrie Tolstedt, once the bank’s retail-banking chief. Tolstedt, who also facing civil charges from the Securities and Exchange Commission (SEC), was not included in Wednesday’s decision.
An OCC spokesperson declined to comment to either Law360 or American Banker. A Wells Fargo spokesperson declined to comment to Law360.