Federal investigators in Charlotte stepping up Wells Fargo probe; more changes in retail bank

Federal investigators have begun interviewing bank examiners in Charlotte as they pursue a probe of Wells Fargo’s phony accounts scandal, sources familiar with the matter said this week.

The interviews are the latest sign that the U.S. Justice Department is still pursuing its investigation, even as the San Francisco-based bank works to put the scandal behind it.

This week, Charlotte-based community bank head Mary Mack announced changes to her leadership team, as part of what she called an effort to build a better bank. Wells also confirmed that three more executives in California and Arizona – the epicenter of the scandal – have left the company.

The U.S. Attorney’s Offices in Charlotte and San Francisco, which cover Wells’ two biggest corporate hubs, are heading the federal investigation, the Observer has previously reported. Prosecutors have issued subpoenas to the bank seeking communications and documents, sources have said.

Reuters has previously reported that prosecutors planned to interview bank examiners as they seek to determine if Wells Fargo executives hid details from the company board and regulators. The examiners work for the Office of the Comptroller of the Currency, which regulates national banks. An OCC spokesman wouldn’t comment.

The federal probe is ongoing, and it’s not clear how long it will take and whether it would result in civil or criminal charges, the sources said. In such investigations, prosecutors typically want to determine who was responsible for the conduct, how high it went in the organization, how many victims there were and how they were harmed, sources said.

In September, regulators fined the bank $185 million to settle allegations that its employees opened as many as 2 million fake accounts in order to meet high-pressure sales goals. The scandal has tarnished the bank’s reputation, cost former CEO John Stumpf his job and spurred congressional hearings and new investigations.

Wells Fargo spokesman Mark Folk declined to comment on the Justice Department investigation, but said the bank is “taking decisive steps to rebuild the trust of our customers, team members, community partners, and shareholders.”

Wells takes “the need to address each allegation very seriously, and we are working at every level to diligently respond to, investigate, and resolve any issues related to improper sales practices,” Folk added.

The bank’s board is conducting its own investigation and has already taken some action, including terminating four executives and cutting bonuses for eight senior leaders. The board has said it will release the results of its probe by the April 25 annual shareholders meeting.

In a memo to employees this week, Mack disclosed changes in her unit’s organization. Two regional banking executives, rather than three, will now report to her.

Lisa Stevens will head the west region, with the former Southwest region executive, John Sotoodeh, now reporting to her. Michelle Lee, who leads the East region from Charlotte, will add Texas, putting her in charge of about 38,500 of the retail bank’s 78,000 employees.

In other changes, Mack said she plans to add three new executives reporting to her, including one responsible for small business and affluent customers. Stevens had previously been in charge of small business.

“We have taken many steps to rebuild trust with customers and team members,” Mack said in Tuesday’s memo to employees, “but we have more work to do in our journey.”

This story was originally published March 9, 2017 at 4:11 PM with the headline "Federal investigators in Charlotte stepping up Wells Fargo probe; more changes in retail bank."