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Three former Wells Fargo executives who were fined $18.5 million by the bank’s federal regulator in January for their alleged role in a 2016 scandal involving problematic sales practices are on track to settle those enforcement actions for just a fraction of that amount.
The Office of the Comptroller of the Currency (OCC) — under new leadership appointed by President Trump in February — announced Friday that it’s reached settlements with two of those executives totaling $150,000. The OCC won’t comment on the status of the case of the third executive, who is challenging a $10 million fine in court.
The OCC had previously levied a $7 million fine on former Wells Fargo Chief Auditor David Julian and a $1.5 million fine on his deputy, former Executive Audit Director Paul McLinko. Under the terms of the settlement, Julian will pay $100,000 and McLinko will pay $50,000, without admitting wrongdoing.
In a Jan. 14 decision, Acting Comptroller of the Currency Michael Hsu affirmed rulings by an administrative law judge, who in a 2022 hearing determined that Julian and McLinko had failed to plan and manage audit activity that would have detected the problematic sales practices that persisted at the bank for more than a decade.
“This case stems from one of the largest scandals in banking history,” Hsu said in his decision. “Under pressure to meet unreasonable sales goals, thousands of employees at Wells Fargo engaged in a collection of practices [that] included opening millions of unauthorized customer accounts, transferring funds without customer consent, lying to customers that certain products were available only as a package with other products, enrolling customers in online banking and bill-pay without their consent … and falsifying customers’ personal information.”
Hsu, who headed the OCC during the Biden administration, stepped down on Feb. 10 and was succeeded by Trump appointee Rodney Hood.
Julian and McLinko appealed Hsu’s decision the day after it was issued, with attorneys for McLinko calling it and other rulings against their client “arbitrary, capricious [and] an abuse of discretion,” and “infected by multiple prejudicial evidentiary and procedural errors.”
A March 13 scheduling order gave attorneys for Julian and McLinko until April 22 to file briefs with the U.S. Court of Appeals for the District of Columbia, with final briefs from all parties due on July 7. But on April 1, the court suspended the briefing schedule with no explanation.
A spokesperson for the OCC declined to comment on why it chose to settle with Julian and McLinko rather than defend its previous orders in court, saying it “does not comment on specific enforcement actions beyond what is published [on] our website.”
In a statement, an attorney representing McLinko said he has “has spent the last five years and more fighting the government” through an “exhausting process.”
“We have said from the beginning that Mr. McLinko did nothing wrong and that he would be vindicated once he had the chance to make his case before neutral judges,” the attorney said. “The OCC at last was faced with making its case before a federal court, and it decided to settle.”
Attorneys for Julian did not respond to a request for comment.
Julian and McLinko each signed consent orders saying that they agreed to settle with the OCC “to avoid the costs associated with future administrative and judicial proceedings” without admitting the allegations against them, or the findings and conclusions of the administrative law judge.
In the third case, Hsu on Jan. 14 ordered former Wells Fargo Community Bank Group Risk Officer Claudia Russ Anderson to pay a $10 million civil money penalty, agreeing with an administrative law judge’s finding that she “failed to institute effective controls to manage the risks” posed by the bank’s sales practices.
Anderson appealed the case the next day, and has until May 12 to file a brief with the U.S. Court of Appeals for the District of Columbia. The OCC declined to comment on the status of that case.
Having settled with Julian and McLinko, Anderson’s case is the last of 11 enforcement actions the OCC pursued against 11 former Wells Fargo executives related to the bank’s alleged systemic and widespread sales practices misconduct.
All told, the OCC has collected more than $43 million in fines from Wells Fargo executives to date. That’s on top of the $185 million in fines the bank agreed to pay the Consumer Financial Protection Bureau (CFPB), OCC, and City and County of Los Angeles in connection with the scandal in 2016.
Carrie Tolstedt, the former head of Wells Fargo’s Community Bank, was the only Wells Fargo employee to face criminal charges for her role in the cross-selling scandal.
Tolstedt was sentenced to 12 months of probation after pleading guilty in March 2023 to obstructing the government’s investigation into the bank’s sales practices.
While the OCC originally sought a $25 million civil penalty against Tolstedt in 2020, she eventually settled for $17 million.
Tolstedt, who also reached a $3 million settlement with the SEC, collected a $125 million retirement package from Wells Fargo, although the bank “clawed back” $67 million of that compensation, CNN reported at the time.
In February of last year, Tolstedt and her husband, Brad, sold a home in Phoenix for $7.8 million, then bought another home in August for $5.9 million, The Arizona Republic reported.
Other former Wells Fargo executives who paid fines to the OCC in the wake of the cross-selling scandal include:
- Former Chairman and CEO John Stumpf ($17.5 million)
- Former General Counsel James Strother ($3.5 million)
- Former Chief Administrative Officer Hope Hardison ($2.25 million)
- Former Chief Risk Officer Michael Loughlin ($1.25 million)
- Former Community Bank Group Finance Officer Matthew Raphaelson ($925,000)
- Former Head of Community Bank Deposit Products Group Kenneth Zimmerman ($400,000)
- Former Head of Community Bank Human Resources Tracy Kidd ($350,000)
In a separate case in 2021, Wells Fargo agreed to pay the OCC a $250 million fine over the bank’s practices for helping homeowners having trouble paying their mortgages.
In 2022, Wells Fargo agreed to pay $3.7 billion to settle allegations by the CFPB that it harmed millions of consumers over a period of several years through widespread mismanagement of mortgages, auto loans and deposit accounts.
Once the nation’s largest mortgage lender, Wells Fargo was overtaken by direct lender Rocket Mortgage (then known as Quicken Loans) in 2017. It’s no longer ranked among the nation’s top 10 mortgage lenders, but could be poised for a comeback this year as it makes progress in getting out from under a $1.95 trillion asset cap that’s limited the bank’s growth.
If the asset cap is lifted as the bank continues to close consent orders imposed by regulators, Wells Fargo could gain more capacity to originate jumbo mortgages that exceed Fannie Mae and Freddie Mac’s $806,500 conforming loan limit and hold those loans on its books.
Editor’s note: This story has been updated to include a statement from an attorney representing Paul McLinko.
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