LOS ANGELES _ The nation's top bank regulator knew about problems with Wells Fargo & Co.'s sales practices in 2010 but did not do enough to put an end to the bank's bad practices, an internal agency review has concluded.
The Office of the Comptroller of the Currency said that its oversight of Wells Fargo was lax and that examiners missed numerous opportunities to have the bank address its problems, according to a report released Wednesday. Those problems led to the creation of as many as 2.1 million accounts that customers didn't authorize.
"The OCC did not take timely and effective supervisory actions after the bank and the OCC together identified significant issues with complaint management and sales practices," according to the report.
It noted that problems with the bank's sales practices had been mentioned in OCC reports since at least 2010 and the bank had been warned about its handling of complaints as early as 2009.
OCC bank examiners also didn't seek to understand the root causes of those or other problems, which allowed them to fester, according to the 15-page report.
Comptroller of the Currency Thomas Curry said during a congressional hearing in September, soon after the bank reached a $185 million settlement with the OCC and other regulators over its sales practices, that he had ordered a review of the OCC's supervision of Wells Fargo. Wednesday's report is the product of that review.
"In his September testimony, the Comptroller stated unequivocally that the OCC can and must do better, including identifying and acting on issues like these sooner," Deputy Comptroller Bryan Hubbard said in an email Wednesday. "The report includes lessons learned that address the issues and weaknesses identified in the review."
Hubbard said the OCC would not provide additional comment on the report. Wells Fargo declined to comment.
The report noted that bank examiners met in early 2010 with Carrie Tolstedt, the former Wells Fargo executive who led the community banking division that is at the center of the unauthorized accounts scandal.
Examiners asked Tolstedt about 700 whistleblower complaints about workers "gaming" the bank's sales goal system to boost their pay. But after that meeting, examiners apparently did not investigate further, the report found.
In another instance, examiners apparently thought the bank's push to get customers to open an average of eight accounts each seemed risky but did not take an in-depth look at how the bank was monitoring sales.
The OCC's internal review is the latest development toward assigning blame over the bank's sales practices, which were first reported in a 2013 Los Angeles Times investigation and became a national scandal after Wells Fargo's settlement with regulators in September.
The settlement led to a pair of brutal Capitol Hill hearings, during which lawmakers grilled Wells Fargo's then-CEO John Stumpf, who later resigned. Some lawmakers also had tough questions for the OCC and the Consumer Financial Protection Bureau, asking why those agencies had not identified problems at the bank earlier.
The OCC's report comes just a week after Wells Fargo released its own report, based on a months-long internal investigation of what led to the scandal.
That report, prepared by a law firm hired by the board, put much of the blame for the company's unethical practices on Stumpf, Tolstedt and generally weak corporate oversight.
The report alleged that Tolstedt created a pressure cooker environment and shielded the practices at her division from Stumpf and the board. That included playing down the number of workers terminated for unethical practices, a figure that had reached 5,300 by last year.
The law firm, which interviewed some 100 former and current employees and reviewed 35 million documents, also found that questionable sales practices dated back to at least 2002.
The report failed to quell continuing anger over the scandal, which has caused fewer consumers to open new accounts and contributed to the bank reporting flat first-quarter earnings last week. The bank noted that its portfolio of consumer loans shrank, in part because of fewer credit card account openings over the last several months.
Institutional Shareholder Services, which advises big investment firms on corporate governance issues, recommended earlier this month that shareholders at the bank's April 25 annual meeting vote against the election of 12 of the bank's 15 board members, including Chairman Stephen Sanger.
In an open letter to Wells Fargo shareholders on Wednesday, California State Treasurer John Chiang called the bank's behavior "morally repugnant" and urged shareholders to vote against seven board members, including Sanger, long-tenured director Susan Swenson and five others who were all members of the bank's corporate responsibility committee in the years leading up to the scandal.
Chiang, who is a board member of the state's two massive public pension funds _ the California Public Employees' Retirement System and the California State Teachers' Retirement System _ said he is urging those funds to cast their votes that way. CalPERS and CalSTRS collectively own more than $2 billion in Wells Fargo stock, according to Chiang's letter.
Chiang also urged shareholders to push the bank to end its use of forced-arbitration agreements, which require that bank customers settle disputes in private arbitration rather than in court.
