Former Wells Fargo risk officer pays $1.25M CMP
Former Wells Fargo Bank, N.A., Chief Risk Officer Michael Loughlin has agreed to the OCC's issuance of a Consent Order to cease and desist and to pay a civil money penalty of $1.25 million.
The Comptroller found and Loughlin neither admitted nor denied, that:
- From 2010 to his retirement in 2018, Respondent was the Bank’s Chief Risk Officer. He reported to the Risk Committee of the Board and reported administratively to the Chief Executive Officer (“CEO”).
- Among other things, Respondent was responsible for providing credible challenge to business leaders on activities that may lead to elevated risk, for ensuring proactive identification of emerging risk issues and their potential effect on the company’s aggregate risk profile, and for timely escalating risk concerns to the Chair of the Risk Committee, the Risk Committee, and/or the CEO.
- Respondent was a member of the Bank’s Operating Committee from 2007 to 2018 and was on the Bank’s Board of Directors from November 2006 through December 2014.
- Respondent served on several management committees with oversight roles related to sales practices misconduct.1 He was chair of the Enterprise Risk Management Committee and served on the Team Member Misconduct Executive Committee and the Incentive Compensation Steering Committee.
- From at least 2002 until October 2016, the Community Bank, the largest line of business within the Bank, had a systemic sales practices misconduct problem.
- The root cause of the systemic sales practices misconduct was the Community Bank’s business model which imposed unreasonable sales goals on its employees along with unreasonable pressure to meet these goals. Additionally, the Bank’s controls were ineffective and were not reasonably designed to detect or prevent the misconduct.
- By 2012 at the latest, Respondent should have known about the systemic sales practices misconduct problem in the Community Bank, its root cause, and the inadequate controls in place to prevent and detect such misconduct.
- From at least 2013, Respondent’s efforts were inadequate in advising the CEO and the Board of Directors that the Community Bank’s business model posed significant risks and incentivized illegal activity, that the relevant controls were deficient, and that the Community Bank was not resolving the problem.
- As Chief Risk Officer and Head of Corporate Risk, Respondent failed to fulfill the incentive compensation oversight responsibilities of Corporate Risk to ensure the risks of incentive compensation programs were adequately understood and managed appropriately throughout the Bank.
- Respondent co-authored three annual incentive compensation risk impact memoranda in 2014, 2015, and 2016 that were provided to the Human Resources Committee of the Board of Directors and to the OCC. Respondent rated the Community Bank’s management of sales practices “satisfactory” in each memorandum and recommended no incentive compensation adjustments for Community Bank senior leadership related to sales practices until 2016, when he recommended minimal adjustments related to sales practices.
- Respondent’s failures to fulfill his responsibilities by appropriately addressing or escalating sales practices risks known to him fostered the illegal and unsafe and unsound sales practices misconduct that existed within the Community Bank and allowed it to perpetuate for years.