Wells Fargo’s legal troubles are building, the San Francisco bank confirmed on Thursday, noting that the Securities and Exchange Commission is now looking into its sham accounts scandal.
The bank has struggled to contain the damage from its acknowledgement in September that thousands of its employees opened accounts customers didn’t ask for, sometimes taking money from an established account to set up an unauthorized one. Since then congressional committees have launched investigations into the matter, along with federal prosecutors and state attorneys general. The Labor Department has launched a “top-to-bottom review” of Wells Fargo.
The SEC, the chief Wall Street watchdog, is now among those looking into the matter, the company said in a government filing. Wells Fargo has also boosted its reserves to deal with legal issues to $1.7 billion from $1 billion, according to the SEC filing.
Lawmakers had called for the SEC to investigate whether the bank had misled investors by not disclosing that it was firing about 1,000 employees a year for setting up the unauthorized accounts. It dismissed about 5,300 employees over a five-year period for such misdeeds. The SEC should ensure “that Wells Fargo and its senior executives are held accountable for a massive, years-long fraud that hurt thousands of customers and potentially cost investors billions of dollars,” Sens. Elizabeth Warren (D-Mass.), Jeff Merkley (D-Ore.) and Bob Menendez (D-N.J.) said in a Sept. 28 letter.
The bank has been roiled by the scandal and launched an extensive campaign to rehabilitate its reputation. Its’ long-time chief executive, John G. Stumpf, retired last month and was replaced by Tim Sloan, its’ chief operating officer.
Sloan is currently touring the country, visiting bank branches and Wells Fargo offices, and has struck a more humble tone is explaining the bank’s problems. While Stumpf repeatedly defended the bank’s culture before incredulous lawmakers, insisting the bad behavior was limited to a small number of employees, Sloan told employees in the company’s Charlotte office last week that Wells Fargo would review its business principles.
“There are things that need to be fixed within our culture. There are weaknesses within it that we must change,” Sloan said.
“It’s also important to note there are no quick fixes to our challenges. You also should expect more tough headlines, as additional accountability actions occur, and other investigations and reviews are completed. Some of that is going to be very painful for us.”
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