WASHINGTON, March 3 (Reuters) – A U.S. Justice Department probe into a phony accounts scandal at Wells Fargo & Co is asking whether executives hid details from the company board and regulators as the problem grew over years, sources familiar with the review said.
The move carries into the Trump era an investigation started under the Obama administration, and could result in criminal charges against bank employees involved.
The Justice Department this week was due to interview federal bank examiners in Charlotte, North Carolina, and ask whether low-level employees broke the law by opening accounts without customer knowledge and if company executives took part in a conspiracy. A grand jury convened in the Northern District of California has also sent subpoenas to witnesses, including former Wells Fargo employees, the sources said.
The third-largest U.S. lender on Wednesday said even more customers may have been affected by the scandal than previously believed.
Wells Fargo disclosed in a $190 million settlement with regulators in September that staff opened as many as 2.1 million checking, savings and credit card accounts without customer consent over several years to satisfy managers’ demands.
The sources declined to be identified because they were not authorized to speak about an open investigation. A bank spokesperson declined to comment on account-related probes but said Wells Fargo is trying to move past the scandal.
Officials are seeking to find out if executives shared everything they knew about the phony accounts to the Wells Fargo board of directors and the Office of the Comptroller of the Currency, the lead regulator for national banks.
Even if executives are not charged with criminal misconduct, they could face civil penalties including fines or a ban from the banking industry. Wells has already fired some executives and clawed back portions of their pay.
Wells CEO John Stumpf resigned after the accounts scandal broke and former chief of retail banking Carrie Tolstedt retired. The bank has fired four mid-level executives and thousands of lower level employees.
Officials will decide what charges to bring once the Justice Department finishes its investigation, work that is expected to wrap later this year, depending on how quickly Justice attorneys can proceed.
The assistant U.S. attorney leading the Wells Fargo case in San Francisco is busy preparing an unrelated criminal case tied to Hewlett Packard’s $11 billion buyout of Autonomy Corp.
To be sure, Wells faces a slew of other investigations from individual states, agencies and U.S. Congress, though criminal charges are what could rock Wells Fargo.
Wells told investors in an annual securities filing on Wednesday that its legal costs could exceed what it has set aside by as much as $1.8 billion.
“We remain focused on providing the accountability and oversight that customers, team members, and investors expect and deserve,” Wells Fargo spokeswoman Jennifer Dunn said.
The U.S. Securities and Exchange Commission’s Philadelphia office, meanwhile, wants to know whether Wells Fargo misled investors by inflating the tally of customers who sought multiple accounts and whether the bank wrongfully went after whistleblowers, according to a person familiar with the matter.
U.S. Representative Jeb Hensarling, the Texas Republican at the head of the House Financial Services Committee, in September summoned four Wells Fargo executives for interviews and threatened to subpoena others, though that review is expected to conclude quietly in the face of the criminal investigations.
A separate review by the Wells Fargo board of directors is examining how the company handled the phony accounts spree that it first believed went on for four years from mid-2011 but may have gone on longer. A report on those findings is due by early April, Wells Fargo has said.
Several states, including Connecticut and Florida, have active investigations into the bank. California issued a search warrant for Wells Fargo’s corporate offices in October, but declined to comment on the status of its review.
The Labor Department is separately examining whether the bank responded as it should have to whistleblowing bank tellers.
(Dan Levine contributed from San Francisco, Sarah N. Lynch contributed from Washington, Karen Freifeld and Dan Freed contributed from New York; Editing by Linda Stern and Meredith Mazzilli)