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) --

Wells Fargo

(WFC) - Get Free Report

is involved in an "ongoing internal dispute" over financial disclosure, prompting the departure of its CFO and leading some officials at the bank to contact regulators over concerns the bank is being too aggressive in its accounting, according to an analyst report published Tuesday.

Christopher Whalen, analyst at Institutional Risk Analytics and a frequent critic of the largest U.S. banks, downgraded Wells Fargo to "negative" from "neutral" in a sharply-worded four page report that was highly critical of the bank's disclosure practices.

The unexpected resignation of Wells Fargo CFO Howard Atkins for what the bank described as "personal reasons"

stunned followers of the company

and sent the bank's shares tumbling for a couple of days, even as most analysts issued notes stating the departure did not materially affect the outlook for the bank.

Whalen, however, sees things differently.

"The departure of Atkins, we are led to believe, was not merely the result of personal issues, but reflects an ongoing internal dispute within

Wells Fargo's executive suite regarding the bank's disclosure," he writes.

Whalen then goes on to argue that Wells Fargo's "public behavior suggests significant problems in the bank's internal systems and controls as defined by the Sarbanes-Oxley law. We further understand that some officials of

Wells Fargo, increasingly uncomfortable with the bank's aggressive public disclosure regime, have reached out to regulators because of concerns regarding accounting issues."

In an email exchange, Whalen declined to elaborate on the report. He also does not cite in the report the source of his information.

Wells Fargo spokesman Oscar Suris reaffirmed what the bank stated in its press release announcing what it called the retirement of Atkins.

"When we announced Mr. Atkins' plans for retirement last week and we announced his successor, Tim Sloan as the CFO, we were quite pointed in saying that the personal reasons for his decision to retire were entirely unrelated to the company's financial condition or financial reporting," Suris said. He went on to argue that those assurances comforted investors, and pointed to a subsequent recovery in the stock as evidence investors had moved past the issue. Wells Fargo shares were higher Tuesday, possibly getting a boost from the latest disclosures by

Berkshire Hathaway

(BRK.B) - Get Free Report

whose boss,

Warren Buffett

, has been a longtime proponent of Wells. Berkshire

increased its stake in Wells

by 6.2 million shares, according to its latest filings.

Atkins could not be reached for comment.

As for Whalen's assertions that Wells Fargo officials have contacted regulators over accounting-related concerns, Suris said "I haven't heard anything like that. It's speculation. I'm not going to comment on it."

After mentioning the alleged internal dispute, Whalen goes on to accuse Wells Fargo of having poorer disclosure than peers among the largest banks when it comes to mortgage-related loan loss exposures.


Wells Fargo's peers among the largest banks have increased written and oral disclosure regarding loan losses and related data during the past three years,

Wells consistently has stonewalled the investment and analyst communities," Whalen writes.

Whalen also has harsh words for

Bank of America

(BAC) - Get Free Report

, writing that loss rates on residential mortgage backed securities and whole loans for the overall market suggest the pictures painted Wells Fargo and Bank of America are too rosy.

This overly optimistic view "is also visible in many other large US banks, but

Bank of America and

Wells Fargo are the worst offenders in our view," Whalen writes, adding, "simply stated, the loss rates are far too low compared with loss experience visible on RMBS and whole loans."

A Bank of America spokesman declined to comment.


Written by Dan Freed in New York


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