Wells Fargo's main regulator aims to punish former managers

Wells Fargo & Co.’s main regulator is preparing civil charges against former managers related to their roles in its retail banking scandals, people familiar with the matter said.

The Office of the Comptroller of the Currency has been readying so-called notices of charges against as many as 10 individuals and may reach settlements with some, the people said, asking not to be identified because the discussions aren’t public. Carrie Tolstedt, who ran Wells Fargo’s sprawling community bank, former chief administrative officer Hope Hardison and onetime chief auditor David Julian may be among those facing the charges, the people said.

An announcement hasn’t been finalized and negotiations are ongoing, the people said. An OCC spokesman declined to comment. Representatives for Ms. Tolstedt, Ms. Hardison and Mr. Julian declined to comment.

The breadth of managers swept up in the OCC’s probe shows regulators are seeking to hold individuals accountable in addition to the company over one of the financial industry’s largest scandals since the 2008 crisis. Wells Fargo has been hit with an unprecedented series of punishments, including a Federal Reserve-imposed cap on assets and an order giving the OCC the right to remove some of the bank’s executives or board members.

The actions against Wells Fargo represent a harsher era for those accused of wrongdoing in the banking industry when compared with the widely criticized environment following the financial crisis. Cases the OCC brings against former Wells Fargo leaders would represent a rare example of individual accountability at the highest levels in bank wrongdoing. Even after the billions of dollars in fines the firms paid following the crisis, very few individuals faced such actions. Notices of charges can lead to monetary penalties and bans from working in the industry.

The OCC’s move would cast another spotlight on the bank’s misconduct as new CEO Charlie Scharf tries to move the company beyond three years of legal and regulatory fallout that have cost billions of dollars and claimed two previous chief executives. The Department of Justice and the Securities and Exchange Commission also have been investigating.

The scandals erupted in 2016 with the revelation that employees may have opened millions of bogus accounts to meet sales goals. Issues soon emerged in other divisions, prompting a flurry of probes and settlements. The Justice Department staff also have been scrutinizing the actions of individual executives, people familiar with the investigation have said. A spokesman for the agency declined to comment.

Wells Fargo has repeatedly come under pressure from the OCC in recent years, as the regulator imposed a $500 million penalty, helped to remove Ms. Hardison and Mr. Julian from their posts in 2018, and issued a rebuke of the bank’s progress under former CEO Tim Sloan during a March hearing before Congress. Wells Fargo announced Mr. Sloan’s retirement days later. The board hired Mr. Scharf after a six-month search for an external candidate that was subject to the OCC’s sign-off.

Wells Fargo’s legal troubles have weighed on its shares, which have sat out the 53% advance in the KBW Bank Index since the scandals broke in September 2016. The stock is down almost 10% this year, the worst performance in the index. Among 32 analysts tracked by Bloomberg, only six recommend buying the bank’s shares.

[More: Wells Fargo to remain under political pressure through 2020, Cowen warns]