Banking, finance, and taxes
John Stumpf's Major Fall From Grace, Massive Fine and Ban From Banking
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Of the major U.S. banking CEOs Jamie Dimon of JPMorgan Chase & Co. (NYSE: JPM) has by far the most visible and recognizable face among his peers. He has been considered for many years, with the exception of immediately after the so-called “London Whale” trading scandal, to also be the most respected of top banking CEOs in the country. There was a brief period when John Stumpf, the former CEO of Wells Fargo & Co. (NYSE: WFC), was viewed as America’s top banking CEO during the post-Whale-scandal period. That was then, and now is a rather different and very negative view of John Stumpf’s career.
News was issued late on Thursday pertaining to final penalties and punishment tied back to Wells Fargo’s fake-accounts scandal that caused Stumpf’s removal and still managed to cause the removal of his replacement. The Office of the Comptroller of the Currency (OCC) sought a prohibition order and a $17.5 million civil money penalty was sought against John Stumpf. The consent order showed that a total of approximately $70 million in equity-related forfeitures, and bonus and salary were sought. Stumpf is also taking a lifetime ban in working for or with any insured banking group.
The OCC also announced today the issuance by consent orders: a personal cease and desist order and a $2.25 million civil money penalty against the bank’s former Chief Administrative Officer and Director of Corporate Human Resources Hope Hardison; and a personal cease and desist order and assessment of a $1.25 million civil money penalty against its former Chief Risk Officer Michael Loughlin for their roles in the bank’s sales practices misconduct.
The OCC also charged five other former executives, including Carrie Tolstedt, who ran Wells Fargo’s consumer bank group during the sales practices scandal. Those cases are shown to be play out in administrative proceedings. Those fines (relief sought) and penalties to other senior officials at Wells Fargo were laid out below:
- Carrie Tolstedt, former head of the Community Bank: Prohibition order and a $25 civil money penalty.
- Claudia Russ Anderson, former Community Bank Group Risk Officer: Prohibition order and a $5 million civil money penalty.
- James Strother, the former General Counsel: Personal Cease & Desist order and a $5 million civil money penalty.
- David Julian, the former Chief Auditor: Personal Cease & Desist order and a $2 million civil money penalty.
- Paul McLinko, the former Executive Audit Director: Personal Cease & Desist order and a $500,000 civil money penalty.
Charlie Scharf, Wells Fargo’s current CEO who recently took over, issued a letter that was less than supportive of the disgraced former boss. Scharf’s letter said:
Today the Office of the Comptroller of the Currency announced a series of actions against former employees regarding their behavior around the historical Community Banking sales practices. In addition, the OCC provided a detailed account of business practices and management responses based on its extensive investigation.
The OCC’s actions are consistent with my belief that we should hold ourselves and individuals accountable. They also are consistent with our belief that significant parts of the operating model of our Community Bank were flawed. At the time of the sales practices issues, the Company did not have in place the appropriate people, structure, processes, controls, or culture to prevent the inappropriate conduct.
This was inexcusable. Our customers and you all deserved more from the leadership of this Company.
We are reviewing today’s filings and will determine what, if any, further action by the Company is appropriate with respect to any of the named individuals. Wells Fargo will not make any remaining compensation payments that may be owed to these individuals while we review the filings.
The move from the OCC has presented no impact on Wells Fargo’s common stock now that the actions are old enough and now that Wells Fargo is already under an asset cap from the Federal Reserve until it can prove that its former practices and other issues are entirely behind it.
There was a time that John Stumpf would have been considered one of the greatest bankers of the modern era. That is now history, and Jamie Dimon will get to continue as the most respected current bank CEO of America’s largest banks.
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