The Office of the Comptroller of the Currency failed to investigate complaints about abusive sales practices at Wells Fargo despite first learning of potential issues more than a decade ago, according to the agency’s internal investigation of its handling of the scandal.

The report, released Wednesday, paints a scathing portrait of the OCC, acknowledging that it missed red flags, failed to pay proper attention to whistleblowers and did not follow up on problems it detected.

For example, in 2010—six years before regulators revealed that Wells’ employees had been creating fake accounts to meet aggressive sales goals—the agency’s examiners interviewed top bank officials about more than 700 complaints Wells had received about the gaming of sales incentives. Yet the OCC failed to undertake an investigation, focusing more on the process of handling complaints than on what was being alleged.

"The OCC did not take timely and effective supervisory actions after the bank and the OCC identified significant issues with complaint management and sales practices," the report by the OCC's Office of Enterprise Governance and Ombudsman said. "Over the course of this seven year period, there were opportunities for the OCC to escalate supervisory action to resolve this issue."

Wells Fargo sign
"There were opportunities for the OCC to escalate supervisory action to resolve this issue" on Wells Fargo's phony accounts, according to an agency investigation. Bloomberg News

The report gets to the heart of how Wells’ activities were allowed to go on for so many years without the bank’s management or regulators becoming aware of it, even though there were hundreds of whistleblower complaints drawing attention to it. Ultimately, the practices were revealed by articles in the Los Angeles Times, which sparked an investigation by the L.A. city attorney that was eventually joined by the OCC and the Consumer Financial Protection Bureau.

The OCC’s internal investigation, undertaken at the behest of Comptroller Thomas Curry, showed that the agency missed several opportunities to detect and correct problems. Starting in 2005, the bank’s board received regular audit reports indicating that there were high levels of internal complaints and employee terminations related to “sales integrity violations.” The OCC’s examiners didn’t appear to pick up on the issue until 2010, and even then gave it short shrift.

Since the scandal came to light, much has been made of comments made by former Wells Fargo CEO John Stumpf related to cross-selling, in which he encouraged employees to sell customers’ at least eight products because “eight is great.” In 2010, the OCC attributed many complaints to the cross-selling initiatives, but didn’t look further.

“We are aware of no assessment of the risks and controls associated with the corporate goal of cross-selling eight products per household,” the OCC’s Wells Fargo team wrote in 2010, according to the report.

The 15-page report identified many areas in which the OCC failed to follow its own guidance, engaged in ineffective supervision of Wells, and lacked basic documentation. In addition, though the OCC knew of several "matters requiring attention," known as MRAs, examiners failed to follow up on several matters, closed others without resolving issues or allowed a longer time frame.

For example, it issued an MRA in 2010 that required Wells to implement a companywide complaint management system, something that could have helped detect problems earlier. Yet the OCC repeatedly failed to follow up on the matter, extending its deadline first to 2011, then to 2012, and finally closing it in 2013 without it being fully corrected. The issue is still not corrected, the report found, and is part of the 2016 consent order that Wells reached with the L.A. city attorney and federal regulators.

The report, "Lessons Learned Review of Supervision of Sales Practices at Wells Fargo," listed nine specific areas where the OCC could improve, including on handling complaints and whistleblower analysis and follow-up, as well as keeping clear supervisory records and greater attention to reputational risk.

Examiners reached conclusions "without testing or determining the root causes of complaints despite the existence of red flags," the report said. The OCC also failed to follow up on significant complaint management and sales practices issues and failed to document resolution of whistleblower cases.

OCC examiners "missed opportunities to perform comprehensive analysis" at Wells and were instead focused on bank processes, the report found.

In one example, the OCC's supervisory strategy in 2011 and 2013 was to conduct tests and samplings of Wells' sales incentive plan, but examiners never followed through, the report said.

In March, the OCC removed Bradley Linskens, a senior national bank examiner who led a team of more than 60 people supervising Wells, from his position, though he remains employed by the agency, said OCC spokesman Bryan Hubbard.

Curry had asked for a postmortem of the OCC's investigation of Wells at a Sept. 20 Senate hearing. The OCC continues to conduct a review of sales practices across large national banks and federal savings associations.