Wells Fargo, the iconic San Francisco-based financial services giant, already faces unprecedented government punishment for major scandals revealed in recent years. In February, in the final action by departing Fed Chair Janet Yellen, the Federal Reserve announced that the company could not increase the $1.93 trillion in total assets it had at the end of 2017 unless its record in coming months and years effectively established that it could be considered a reputable corporate citizen once again.

The unusual sanction came after internal corporate documents emerged that showed Wells Fargo’s sales agents opened up at least 3.3 million credit card, checking and savings accounts for existing customers without their permission from 2011 to 2016. That scandal was first reported by the Los Angeles Times, which eventually led to a follow-up report by The New York Times that showed Wells Fargo agents had also charged 800,000-plus customers for auto insurance they didn’t need or request, leading about 300,000 clients to become delinquent on their loans.

Wells Fargo has already paid $407 million in fines and to settle lawsuits related to these mass frauds. Now there are reports that two federal regulatory agencies – the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency – are looking to sock the venerable bank with an additional $1 billion in civil penalties. The penalties would be for the auto insurance scandal as well as previously undisclosed fraud in Wells Fargo’s mortgage-writing business in which customers were once again charged excessive fees, according to the Washington Post.

The interlocking scandals all stem from what the Los Angeles Times’ initial scoop depicted as a pressure-cooker environment in sales offices where agents had to fill quotas for opening new accounts. This led to a corporate culture in which many agents came to see customers as profit centers.

Years of bad publicity not hurting bank’s bottom line

Wells Fargo CEO Tim Sloan – promoted in 2016 after the scandals led to thousands of firings and resignations – told analysts in a recent conference call that he was confident his company was on the right track even if it faced an additional $1 billion in penalties. However, Sloan appeared concerned that still more embarrassing revelations might be forthcoming – saying that “in terms of declaring victory and walking ahead, we’re not quite there yet.”

But despite the breadth of the scandals – and the massive bad publicity they generated – Wells Fargo’s bottom line hasn’t appeared to suffer. On Friday, the company reported that profits for the first quarter of 2018 were $5.9 billion – up from $5.6 billion in the same period of 2017. Bank officials cited the lower corporate tax rates approved by Congress and signed by President Donald Trump in December.

While Wells Fargo’s stock priced closed Monday at $50.89 a share – near its 52-week low – it remains more than 120 percent higher than in the summer of 2010, about the same increase as the Dow Jones Industrial Average over the same time span.

Meanwhile, the Seeking Alpha investment website reported this week that America’s most famous investor – Warren Buffett of Berkshire Hathaway – was highly bullish on the company.

As of Dec. 31, Berkshire Hathaway owned $23.3 billion of Wells Fargo stock. “It is easy to see why Buffett would invest in Wells Fargo. Buffett typically looks for high-quality businesses with sustainable competitive advantages, trading at discounts to their long-term intrinsic value. Wells Fargo appears to be undervalued, with a strong brand and compelling dividend,” wrote Seeking Alpha analyst Bob Ciura. “The stock remains attractive for value and income investors.”

Events of the past week show Wells Fargo’s attempts to put a huge scandal behind it by paying a $185 million penalty and settling a class-action lawsuit for $142 million have failed because of fresh evidence of corporate malfeasance – grim news for the iconic San Francisco-based bank.

The fine and settlement were over what a Wells Fargo internal report showed were company sales agents –under pressure to meet quotas – opening up to 2.1 million unwanted checking, savings and credit-card accounts from 2011 to 2015. The revelation had already forced the resignation of CEO John Stumpf and led to the firing of more than 5,000 mostly low-level employees.

But now that the New York Times has broken the story of another massive scandal, more heads are rolling. The Times obtained an internal audit that showed more than 800,000 Wells Fargo customers were charged for auto insurance they didn’t need, forcing more than 270,000 to fall behind in their payments and leading to nearly 25,000 vehicles being repossessed.

While Wells Fargo’s board was specifically cleared in the internal report on unwanted accounts, the new round of bad news produced a dramatic shake-up even without a formal assessment of blame. The three longest-serving members – current chair Stephen Sanger and regular members Cynthia Milligan and Susan Swenson – will retire at the end of the year.

Sanger is being replaced by the board’s current vice chair, former Federal Reserve governor Elizabeth “Betsy” Duke, on Jan. 1. Wells Fargo depicted the board departures as routine, but market analysts said it was plainly related to shareholders’ anxiety over the emergence of a second mega-scandal. Not only has Well Fargo’s stock price gone down by more than 13 percent since March 1, there’s also a sense that regulators and federal lawmakers who have been harshly criticized by activists for letting Wall Street practices that led to the Great Recession go unpunished see a second chance to hold financial manipulators accountable.

Duke, the new Wells Fargo board chair, is also facing pressure to unilaterally begin a sweeping, independent investigation into company practices to determine if there were other policies that saw customers as “cash cows” to be exploited. A San Francisco Chronicle analysis made the case that a massive forensic audit may be necessary because only one wing of the financial giant – retail banking – had faced serious scrutiny. Writer Thomas Lee suggested there was a calculation to the limits on scrutiny and noted that a whistleblower first notified company executives of fraudulent accounts being opened on a massive basis by agents under pressure to meet quotas all the way back in 2001 – not 2011.

Trump SEC boss may cool regulatory zeal

Yet there is good news of late for embattled Wells Fargo officials. The Trump administration is sending out strong signals of a hands-off approach on financial regulation, according to a recent New York Times report. It noted that new Securities and Exchange Commission Chairman Jay Clayton cited costs to shareholders imposed by onerous rules in his confirmation hearing.

Clayton’s views appear to have had an effect. On Aug. 6, the Wall Street Journal reported that “Wall Street regulators have imposed far lower penalties in the first six months of Donald Trump’s presidency than they did during the first six months of 2016, a comparable period in the Obama administration.”

Whether or not Wells Fargo faces renewed pressure from regulators, it appears fully able to weather more scandals. The company, founded in 1852 in San Francisco, remains profitable and has more than 260,000 employees in all 50 states. While Wells Fargo’s stock price has dropped this year, it is still up by more than 60 percent since the start of 2013.

Wells Fargo’s hopes that a $142 million June

The New York Times broke the story after obtaining an internal audit that showed more than 800,000 people who took out vehicle loans from the San Francisco-based banking giant “were charged for auto insurance they did not need, and some of them are still paying for it … . The expense of the unneeded insurance, which covered collision damage, pushed roughly 274,000 Wells Fargo customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions.”

Wells Fargo executives interviewed by the Times vowed to fully reimburse anyone adversely affected by its policy, but another class-action lawsuit with a massive payout seems likely. While bank executives suggested they deserved credit for having “self-identified” the problem, the size of the scandal seems likely to have a far-reaching effect on a company that has gone from being a stock analyst darling for its considerable long-term growth to a symbol of a banking industry seen as villainous by many Americans for its role in the economic meltdown that began in 2007.

In the previous scandal, besides the class-action payout, the company was fined $185 million by federal regulators in September 2016. CEO John Stumpf abruptly resigned soon afterward, voluntarily giving up $41 million in bonuses he was scheduled to receive.

Wells Fargo initially appeared to have shrugged off the scandal. While its stock price fell under $44 after Stumpf left, it topped $59 in March. Its market value remained well north of $250 billion, its profits were strong and it had a significant presence in all 50 states, employing nearly 270,000 workers.

Of late, however, Wall Street has soured on the company – even before the new scandal emerged. On July 21, CNBC reported a respected analyst predicted a more than 30 percent drop in Wells Fargo’s stock price, then in the $55 range. It plunged 2.6 percent Friday after the Times report came out and is now under $53.

Were wrong workers punished for first scandal?

The new scandal is likely to not only prompt regulators to take close looks at every aspect of Wells Fargo’s business but to re-examine how they dealt with the previous scandal.

Wells Fargo’s CEO may have left, but the company was partially successful in deflecting the idea that the setting up of unwanted new accounts by employees eager to meet quotas was the fault of the employees – not those who set the aggressive quotas. The company fired more than 5,000 mostly low-level workers who had set up the accounts, but the vast majority of managers were unaffected.

This was even though the initial Los Angeles Times investigation in 2013 that broke the scandal depicted the later-fired workers as doing the bidding of their mid-level bosses, who were facing pressure from their top-level bosses – suggesting the wrong people were paying the price for the scandal. The auto loan scandal only adds to the narrative that Wells Fargo’s ethical problems begin from the top down.

The New York Times report on the new scandal said the internal report only looked at “insurance policies sold to Wells customers from January 2012 through July 2016.”

This is likely to prompt calls for regulators and journalists to look back far earlier than 2012. Perhaps the biggest complicating factor in the $142 million settlement of the unwanted accounts scandal was the evidence offered by some plaintiffs’ attorneys that the scandal began in 2002, not 2011. They argued that the high-range estimate of  unwanted accounts created by Wells Fargo agents was far too low and should have been 3.5 million, not 2.1 million.

San Francisco-based banking giant Wells Fargo continues to struggle to get past the worst scandal in its history.

The company – which has a market value of $265 billion and nearly 270,000 employees in all 50 states – was fined $185 million by federal regulators in September. The scandal involved employees, seeking to make quotas, creating up to 2.1 million unwanted new accounts for customers from 2011-2015. More than 5,000 employees who had improperly set up the new checking, savings and credit-card accounts were fired.

Wells Fargo CEO John Stumpf resigned soon after the fine was announced, surrendering $41 million in bonuses he was on track to receive.

But the company’s hopes to leave the scandal behind by settling related class-action lawsuits for $142 million have been complicated by new allegations by plaintiffs’ attorneys. They say the scandal’s origin was in 2002, not 2011, and that the actual number of unwanted accounts created by Wells Fargo agents is up to 3.5 million, not 2.1 million.

U.S. District Judge Vince Chhabria said last week at a hearing in San Francisco that he was inclined to accept the settlement but also to let some of 10 other plaintiff lawsuits proceed – denying Wells Fargo the tidy resolution it wanted. He also said he would consider scrapping the settlement entirely if new information arises exposing new wrongdoing.

The settlement also could unravel because of its complexity. As it is now structured, Wells Fargo customers who were charged fees for unwanted accounts would be refunded and those whose credit scores suffered because of unwanted credit cards would be compensated based on a formula. But Chhabria appeared receptive last week to the argument that the damage in some cases was far more excessive than others. The example cited was of customers who had unwanted upgrades in checking accounts in which overdrafts were automatically paid by unwanted credit cards – bills that went unpaid because customers didn’t know they had the credit cards. Plaintiffs’ attorneys also argued that the unwanted accounts had in some cases resulted in identity theft.

The judge was far less receptive to Wells Fargo’s lawyers’ argument that the company had gone a long way toward reimbursing affected customers and that it shouldn’t have to pay damages to customers who had no proof they’d been adversely affected.

Appeal of class-action settlement seems certain

Chhabria plans to call attorneys in the case back to court in early June. If he decides to accept the settlement, an appeal is near certain, even if he includes provisions providing more relief to affected Wells Fargo customers.

That’s primarily because of the huge distrust some plaintiffs’ attorneys have for Wells Fargo. While the company CEO was forced out and more than 5,000 agents were fired as a result of the scandal, the attorneys argue that the problems with the unwanted accounts were known company-wide and persisted even after the Los Angeles Times first exposed the creation of the accounts in 2013.

Given this corporate history, the attorneys object to the fact that the federal fine and the parameters of the potential settlement of the class-action lawsuit are based on the report of a Wells Fargo consultant – not an independent investigation.

Zane Christensen, representing affected Wells Fargo customers from Utah, told Bloomberg News, “There’s been no real discovery; there’s no way to know the real extent of the damages. This settlement is entirely based on numbers that come from Wells Fargo’s own admission. We don’t believe Wells Fargo is airing all of its dirty laundry publicly.”