Wells Fargo & Co. has failed to fully comply with five regulatory orders issued in response to the bank’s fraudulent customer-account scandal, according to a U.S. House Finance Services committee report released Wednesday.
The report was accompanied by quotes from two prominent congressional critics of Wells Fargo since the scandal surfaced publicly 3½ years ago: chairwoman Maxine Waters, D-Calif., and Rep. Al Green, D-Texas.
The report — titled “The real Wells Fargo: board & management failures, consumer abuses and ineffective regulatory oversight” represents a yearlong investigation into Wells Fargo’s compliance with regulatory orders made in 2016 and 2018.
The 113-page report was based partly on internal Wells Fargo memos and e-mail exchanges.
It was made public ahead of Tuesday’s scheduled appearance of chief executive Charlie Scharf before the committee, along with Wells Fargo chairwoman Betsy Duke and board member James Quigley on Wednesday.
Waters said the report confirms her belief that Wells Fargo is “a reckless megabank with an ineffective board and management that has exhibited an egregious pattern of consumer abuses.”
On Thursday, she called for the resignation of Duke and Quigley. “They failed in their responsibilities as board members, and they should be shown the door,” Bloomberg News quoted Waters as saying.
A summation of the report determined “the potential for widespread consumer harm still remains at Wells Fargo.”
Republican members of the House Finance committee issued their own analysis of the report Thursday. Rep. Patrick McHenry, R-N.C., is the GOP leader on the committee.
Republicans agreed with the assessment that “Wells Fargo’s uniquely flawed structure and gross mismanagement have stunted the company’s response to the scandal.”
They also blamed lax regulators under the Obama administration for “being slow to recognize the risk,” allowing the scandal to become as widespread as it did.
“Wells Fargo was no closer to complying with the regulators’ consent orders when (former chief executive) Tim Sloan resigned in March 2019 than when his team took over in 2016,” according to the GOP statement. “The management team of company insiders failed to understand the scope of the company’s problems when Sloan took charge in 2016.
“A deficit of in-house risk management expertise stalled the company’s efforts to remediate customers and develop a risk management plan.
“Now, the firm’s regulators — the CFPB, the Office of the Comptroller of the Currency and the Federal Reserve — are making up for lost time under new (Trump administration) leadership.”
Wells Fargo has 3,600 employees in its 32-county Triad West region, including 2,900 locally. It has 25,100 employees in Charlotte.
The bank acknowledged in 2017 the opening and issuing of at least 3.53 million unauthorized checking and savings accounts, debit cards and credit cards between 2009 and October 2016.
Although the bulk of the fraudulent accounts were established in California and Arizona, the bank has said it cannot rule out that 38,722 unauthorized customer accounts were established in North Carolina and 23,327 in South Carolina.
Sloan, who resigned in March 2019 after 2½ years in the role, drew much of the scrutiny in the report.
The report cited that Sloan “gave inaccurate and misleading testimony to Congress” during a March 2019 Finance committee hearing in which he discussed the bank’s efforts to fix its customer-account problems. Waters said she is considering asking the U.S. Justice Department to review Sloan’s comments.
“Key leaders at Wells Fargo were focused on lifting the Federal Reserve’s asset cap, rather than addressing the company’s systemic risk management weaknesses,” according to the report.
The biggest shadow still hanging over Wells Fargo is the Fed’s order, issued Feb. 3, 2018, that prohibits the bank from increasing its total assets beyond the $1.93 trillion it had on Dec. 31, 2017.
“Wells Fargo has clearly demonstrated an unwillingness and inability to stop harming its customers, so this committee is working overtime to make sure consumers are never subjected to the types of abuses and failures committed by this megabank again,” Waters said.
Wells Fargo said it did not have a comment on the report. It cited a statement addressing steps taken by the bank since Scharf became chief executive Oct. 21.
Green said the report “demonstrates not only that Wells Fargo is failing to comply with the terms of multiple settlement agreements dating back to 2016 and 2018, but also that our federal regulators have simply failed to enforce those agreements, despite having ample tools and authorities under existing law to do so.”
The report cited a concerning lack of action and oversight from the U.S. Office of the Comptroller of the Currency and Federal Reserve as Wells Fargo conducted the fraudulent business practices at the heart of the scandal.
“The status quo is unacceptable and must not continue,” Green said.
“Wells Fargo must be held to its obligations to restore those whom it has harmed, and it must end the abuses of consumers, as well as the conditions of the bank that have allowed and promoted such abuses.”
The report found Wells Fargo executives, led by Sloan, responded to the regulatory orders with actions “that reflect an unwillingness to take seriously the bank’s obligations under the 2016 Sales Practices Consent Orders to fully compensate harmed consumers and fix its internal controls.”
One example cited was Duke, then acting as vice chairwoman in November 2017, questioned why she was being included in letters from the Consumer Financial Protection Bureau requesting bank actions on regulatory orders.
Comptroller of the Currency Joseph Otting said in a statement Thursday that “Wells Fargo Bank’s treatment of its customers and employees and its failure to promptly correct identified deficiencies under its previous management are unacceptable for this or any other bank.”
“While the bank still has much work ahead, we are encouraged by the leadership and focus on regulatory matters by the bank’s new chief executive,” Otting said.
The overall committee staff findings include:
The report was released about two weeks after Wells Fargo agreed Feb. 21 to pay $3 billion to settle U.S. Justice Department and Securities and Exchange Commission investigations into fraudulent sales practices by its Community Bank division.
The investigation period covered from 2002 until September 2016. At that time, Wells Fargo agreed to pay a combined $185 million in fines to resolve regulatory complaints.
Wells Fargo agreed as part of the $3 billion fine to establish a $500 million “Fair Fund for the benefit of investors who were harmed by the conduct covered in the agreement.”
Counting the latest civil penalty, Wells Fargo has agreed to pay more than $7 billion to settle various regulatory and legal disputes since the fall of 2016.
The Justice agreement resolves the criminal investigation into sales-practice activities. No criminal charges will be filed against Wells Fargo “provided Wells Fargo abides by all the terms of the agreement.”
The settlements do not prevent the departments from prosecuting current and former employees at a later date.
On Jan. 23, federal banking regulators ordered a $17.5 million fine against former Wells Fargo chairman and chief executive John Stumpf for his role in the scandal. Stumpf agreed to a prohibition order, which includes a lifetime ban from the banking industry.
Truist Financial Corp. is leaving the former BB&T Corp. headquarters building in downtown Winston-Salem after 25 years in favor of three lower-profile sites it owns in the city.
“These transitions are part of Truist’s overall corporate real-estate strategy to move our teams from leased spaces into owned buildings whenever possible,” Truist spokeswoman Shelley Miller said Thursday.
The decision creates more than just a major occupancy challenge for the co-owners of the 20-story building at 200 W. Second St. It also puts the local business and civic communities on notice for re-purposing yet another tower designed for one main occupant, following the two former Wachovia Corp. headquarters buildings, the iconic former R.J. Reynolds Tobacco Co. headquarters and the former GMAC Insurance building.
Those buildings either sat idle for several years or were underutilized before gaining new life as multi-use developments.
Truist completed its move to Charlotte on Dec. 6 when the nation’s sixth-largest bank debuted following BB&T’s $33.5 billion purchase of SunTrust Banks Inc. Truist’s community/retail banking hub remains in Winston-Salem.
Miller said employees will be moving to company-owned office spaces at 101 N. Cherry St., known as the Park Building, and to 110 and 150 S. Stratford Road in the Five Points area.
The operational moves are expected to be completed “in a few months,” Miller said.
Truist will retain its downtown branch in the landmark green-glass skyscraper. The BB&T headquarters had occupied the vast majority of the high-rise, though the building has several other tenants.
It was built in 1987 for $24 million and originally named One Triad Park. BB&T became the anchor tenant after its seminal $2.2 billion merger of equals with Southern National Corp. in 1995.
BB&T spent $22.14 million in February 2017 to buy the Park Building, a 206,000-square-foot former Wachovia building.
Miller emphasized that all current BB&T Financial Center employees are remaining in Winston-Salem.
BB&T had 2,134 employees in Forsyth County, according to a 2018 workforce report to Forsyth commissioners. It also has about 1,700 employees at its Triad Corporate Center complex in Greensboro.
Miller said employees involved in the moves represent several corporate functions, including retail and commercial community banking, small business, credit, commercial fulfillment, underwriting, human resources, risk management and audit.
The most prominent example of the shift in infrastructure strategy from BB&T to Truist came just five days after Truist’s debut when it announced plans Dec. 11 to purchase its new Charlotte headquarters site and rename it as Truist Center.
Truist will occupy initially 550,000 square feet in the 965,000-square-foot, 46-story building at 214 N. Tryon St., which opened in 2002. The goal is to have about 2,000 Truist employees there, with the executive management team already in place.
The seller, Cousins Properties, said the purchase price was $455.5 million and the transaction would close in March.
Winston-Salem Mayor Allen Joines said bank officials called him Wednesday and told him that the move was coming.
“It is a new company policy that they are only occupying space that they own,” Joines said.
“My first question was, does this impact jobs locally? I was assured it does not impact jobs at all. But certainly, losing employees downtown is a concern. But certainly, losing employees downtown is a concern.”
On the other hand, Joines said downtown is still vibrant. “I don’t think it will be that big an impact,” he said. “We don’t know how many will be moved (out of downtown).”
Jason Thiel, president of the Downtown Winston-Salem Partnership, said the move could have an upside if a new corporate client wants to occupy an entire building. “Oftentimes, we have blocks or floors that are not assembled together, so it is a situation where you could build a large operator into the space,” Thiel said.
Thiel acknowledged that if employees leave downtown, that could impact businesses.
Before Truist decided to leave its former corporate headquarters, the building’s fate already was overshadowed by the legal woes of one of its two owners.
A sentencing date has yet to be set for convicted felon Tyson “Ty” Rhame, as well as three co-defendants despite Rhame being convicted on Oct. 10, 2018, of 11 of 13 counts of mail- and wire-fraud conspiracy, as well as multiple counts of mail and wire fraud. The latest postponement was granted in April.
The building has been listed since March 2016 as a potential forfeiture target for the U.S. government if Rhame were convicted.
Rhame has shared ownership of the building with Charlotte investor Ray Gee. They paid $60 million for it in December 2014, nearly $26 million more than its tax value.
Rex Morgan, an attorney representing Gee, has said that “we believe that Mr. Rhame’s conviction will have no effect upon the on-going operation of the BB&T Financial Center, which is being managed by a company owned by Ray.”
The U.S. Attorney’s Office for the Northern District of Georgia has said that “since the case against Tyson Rhame et al. is still ongoing, we cannot provide a comment at this time” as to whether the BB&T headquarters property remains in jeopardy.
Rhame was the founder of Sterling Currency Group LLC of Atlanta. Federal attorneys claimed that between 2010 and June 2015, Sterling grossed more than $600 million in revenue from the sale of the Iraqi dinar and other currencies.
Rhame and Bell also were convicted of making false statements to federal law-enforcement agents. The jury acquitted the defendants of money-laundering charges.
Federal attorneys claimed that between 2010 and June 2015, Sterling grossed more than $600 million in revenue from the sale of the Iraqi dinar and other currencies; Rhame and Shaw received more than $180 million in distributions.
According to the indictment, at least $19.9 million was laundered through 24 accounts. Officials also flagged another $22,643 in 10 accounts for wire and mail fraud.
The Sterling officials were accused by U.S. attorneys of “taking steps to make investors believe they would get rich by investing in the Iraqi dinar.”
Salem Lake attendant and Winston-Salem city employee Jay Council can add dog-saver to his resume after saving a four-legged friend from almost certain disaster Sunday.
Council said Sunday was like any other day at Salem Lake, where he is a part-time attendant, when a visitor called him to tell him a dog was in the water and needed help. Council, who has three dogs of his own, said he jumped into action.
“I look and I see the dog swimming in the lake, barely keeping its head above water,” he said. “I grabbed the fishing net and went down to the boat. I heard it crying and whining, and it was wore out.”
Council said he could tell the dog was struggling to stay afloat. The man who called him about the dog started whistling, and the dog turned toward the dock, but probably wouldn’t make it, Council said.
“The pole was barely long enough for me to reach over into the water and scoop it out of the water,” he said. “When it got closer to the edge of the bank, his back legs were floating in the water and he was just paddling with his front two legs. I’m glad I was there and I was able to save it.”
Once he got the dog onto dry land, Council said he took him into the Salem Lake office building, put out some towels and gave him some water. One visitor who saw the incident gave the dog a jacket and treats.
Council said it felt amazing to save an animal but that he was doing what any dog lover would have done.
“I have three dogs of my own, and I would want someone to do that to my dogs as well if that ever happened,” Council said.
Eventually, Stepping Stones Canine Rescue, a local non-profit, came to pick up the dog, naming him Neptune, the Roman god of the sea.
In a Facebook post, Stepping Stones wrote Neptune is in good spirits, isn’t micro-chipped, isn’t neutered and is in foster care until he can be adopted.
Asked if he has thought about adding Neptune to his pack, Council said he’d have to talk to his wife first.
“When you’re in a marriage you can’t make decisions by yourself,” he said. “You always have to ask your wife.”
A coalition of behavioral-health advocates will hold a rally Saturday with the goal of drawing attention to the more than 750 people in Forsyth County listed on North Carolina’s Registry of Unmet Needs.
The Too Long To Wait rally is scheduled for 2 p.m. at the Forsyth County Central Library, 660 W. Fifth St. in downtown Winston-Salem.
The state’s Medicaid innovations waiver initiative allows people with intellectual disabilities to receive services, known as b(3), and assistance in their homes and communities instead of in an institution.
The services involve in-home skill building, intensive recovery support and transitional living.
Rally organizers say more than 14,000 North Carolinians are on the waiting list for additional Medicaid funding and services, including at least 755 from Forsyth County.
Some people have waited as many as 17 years, with at least 250 waiting since 2010.
“It’s too long!” proclaims the flyer for the rally.
“We need to let the N.C. General Assembly know the 14,000 citizens on this list are an underserved economic and social asset, deserving home and community services,” the handbill continues
“And they vote!”
Bill Donohue, one of the rally organizers, wrote in a recent opinion piece published in the Winston-Salem Journal that the registry represents “people of all ages and socio-economic groups who have intellectual and/or developmental disabilities.”
Donohue and Deborah Woolard are the parents of Jeremy Donohue, 35, who has a rare disease combination of FSH (facioscapulohumeral) muscular dystrophy and Down syndrome.
“Though qualified for assistance, they are put in a holding pattern for the Medicaid Innovations Waiver,” Donohue wrote in the opinion piece.
“In Forsyth County, that number in wait is 755.
“Most scenarios demanding patience find breaks in the pattern — movement, hope. Forsyth County has not had any movement in four years.
“More than half of the 755 have waited a decade or more. Stuck. This is unconscionable.”
The premise of the rally aside, state legislators from both parties are aware of the registry and the pressure to expand the innovation waiver necessary to provide additional funding.
The funding shortfall began in earnest during the Easley and Perdue administration when the Democratic-controlled legislature reduced overall state spending in order to balance the state budget during the Great Recession.
Individuals on the registry list for at least 10 years have been on it throughout Republican control of the legislature that began in 2011.
The 2019-20 Republican-sponsored state budget proposal does not include Medicaid expansion language, but it does call for increasing the number of intellectual/developmental disabilities Medicaid innovation waiver slots by up to 1,000 at a cost of between $32 million and $41 million over two years. Services include personal care and in-home assistance.
Democratic Gov. Roy Cooper vetoed the GOP budget in June, in large part because it does not include a form of Medicaid expansion and it contains a lower pay raise for public school teachers (3.9% compared with his 9.1% recommendation).
By comparison, about 400 individuals were removed from the list in 2018.
Senate GOP leaders have focused on reducing the intellectual/developmental disabilities list in an attempt to counter building momentum for expanding Medicaid.
“While Democrats have focused their efforts on expanding socialized medicine via Obamacare Medicaid expansion, Republicans believe that care for people with severe disabilities should be prioritized over taxpayer funding for able-bodied adults,” according to a July 2019 statement from the office of N.C. Senate leader Phil Berger, R-Rockingham.
State Sen. Joyce Krawiec, R-Forsyth, said that “the backlog of people with disabilities who cannot care for themselves is a serious issue, and funding these slots will continue to be a priority for us.”
Krawiec also cited her preference for prioritizing those on the wait list before funding Medicaid expansion for able-bodied adults.
“This is an area we in the General Assembly need to do better,” state Rep. Donny Lambeth, R-Forsyth, a health-care expert in the legislature, said.
“I’m glad to see families getting organized,” state Rep. Verla Insko, D-Orange, also a health-care expert, said.“This should remind legislators that failure to provide what is promised by a government-funded program makes recipients ask whether the current elected officials, those that are ultimately responsible for the success or failure of these programs, should be replaced at the ballot box.”
Behavioral-health managed care organization Cardinal Innovations, as well as the former CenterPoint Human Services, has been pushed by advocates and legislators for years to provide money from its fund balance to reduce the number of people on the wait list
In some instances, those appeals were often ignored or not approved by previous Cardinal management, led by then-Chief Executive Richard Topping.
Cardinal, under Topping, also cut funding for recipient services and advocacy initiatives, hamstringing some providers with reimbursement cuts. It operated for years with little to no financial, management and board transparency.
“Our teams recently recognized that people on the registry wait list were eligible to receive more services than they were utilizing,” Trey Sutten, who took over as chief executive of Cardinal in January 2018, said in his July 2018 newsletter posted last week on Cardinals’s website.
Sutten acknowledged in the newsletter that “many of you have family, friends or loved ones who have been or are currently on this list.”
“When we get notice that a slot has opened, our teams are poised to get services up and running for that member as soon as possible,” Sutten said.
Cardinal spokeswoman Ashley Conger said Wednesday that the behavioral-health managed-care organizations “follow a process developed by the state to manage the wait list, and allocate slots when they become available.”
Rally organizer Donohue said there are few available solutions, all “residing solely with the North Carolina legislature.”
“Creating a living minimum wage would be a huge start that would contribute to careers for caregivers,” he said. “Using the $800 million in managed-care reserves would be another starter, or maybe the hugely anticipated fourth-quarter interest earnings on 2019 state investments.”
The long-term solution “requires taxation, which requires courage,” Donohue said.
“It’s a huge leap, but we don’t have to start there. Forty-four other states wrestle with this wait list dilemma. Some are in litigation, some are finding creative solutions.
“Few are wrapped in denial and budget gamesmanship like North Carolina.”