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WASHINGTON A U.S. Justice Department probe into
a phony accounts scandal at Wells Fargo & Co is asking
whether executives hid details from the company board and
regulators as the problem grew over years, sources familiar with
the review said.
The move carries into the Trump era an investigation started
under the Obama administration, and could result in criminal
charges against bank employees involved.
The Justice Department this week was due to interview
federal bank examiners in Charlotte, North Carolina, and ask
whether low-level employees broke the law by opening accounts
without customer knowledge and if company executives took part
in a conspiracy. A grand jury convened in the Northern District
of California has also sent subpoenas to witnesses, including
former Wells Fargo employees, the sources said.
The third-largest U.S. lender on Wednesday said even more
customers may have been affected by the scandal than previously
Wells Fargo disclosed in a $190 million settlement with
regulators in September that staff opened as many as 2.1 million
checking, savings and credit card accounts without customer
consent over several years to satisfy managers’ demands.
The sources declined to be identified because they were not
authorized to speak about an open investigation. A bank
spokesperson declined to comment on account-related probes but
said Wells Fargo is trying to move past the scandal.
Officials are seeking to find out if executives shared
everything they knew about the phony accounts to the Wells Fargo
board of directors and the Office of the Comptroller of the
Currency, 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 from
the banking industry. Wells has already fired some executives
and clawed back portions of their pay.
Wells CEO John Stumpf resigned after the accounts scandal
broke and former chief of retail banking Carrie Tolstedt
retired. The bank has fired four mid-level executives and
thousands of lower level employees.
Officials will decide what charges to bring once the Justice
Department finishes its investigation, work that is expected to
wrap later this year, depending on how quickly Justice attorneys
The assistant U.S. attorney leading the Wells Fargo case in
San Francisco is busy preparing an unrelated criminal case tied
to Hewlett Packard’s $11 billion buyout of Autonomy Corp.
To be sure, Wells faces a slew of other investigations from
individual states, agencies and U.S. Congress, though criminal
charges are what could rock Wells Fargo.
Wells told investors in an annual securities filing on
Wednesday that its legal costs could exceed what it has set
aside by as much as $1.8 billion.
“We remain focused on providing the accountability and
oversight that customers, team members, and investors expect and
deserve,” Wells Fargo spokeswoman Jennifer Dunn said.
The U.S. Securities and Exchange Commission’s Philadelphia
office, meanwhile, wants to know whether Wells Fargo misled
investors by inflating the tally of customers who sought
multiple accounts and whether the bank wrongfully went after
whistleblowers, according to a person familiar with the matter.
U.S. Representative Jeb Hensarling, the Texas Republican at
the head of the House Financial Services Committee, in September
summoned four Wells Fargo executives for interviews and
threatened to subpoena others, though that review is expected to
conclude quietly in the face of the criminal investigations.
A separate review by the Wells Fargo board of directors is
examining how the company handled the phony accounts spree that
it first believed went on for four years from mid-2011 but may
have gone on longer. A report on those findings is due by early
April, Wells Fargo has said.
Several states, including Connecticut and Florida, have
active investigations into the bank. California issued a search
warrant for Wells Fargo’s corporate offices in October, but
declined to comment on the status of its review.
The Labor Department is separately examining whether the
bank responded as it should have to whistleblowing bank tellers.
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