By Dan Freed

(Reuters) - James Strother, Wells Fargo & Co's <WFC.N> general counsel, who had originally planned to retire at year-end, will stay on indefinitely in the position to deal with fallout from the bank's sales scandal, according to a bank spokesman.

"In light of recent events the decision was made to have Jim Strother remain with the company and continue to serve as our general counsel," said Peter Gilchrist, a Wells Fargo spokesman.

The decision was made by the bank's board of directors and a search is under way for Strother's replacement, Gilchrist said.

An email and call to Strother were not returned.

The scandal pertains to Wells Fargo opening as many as 2 million accounts in customers' names without their permission. The bank is facing lawsuits from former employees and customers, as well as increased regulatory scrutiny.

Strother became the San Francisco-based bank's top lawyer in 2003, and sat behind then-CEO John Stumpf at a bruising congressional hearing about the scandal in September. He has been at Wells Fargo and its predecessor, Norwest Corporation, since 1986.

Strother was deeply involved in Wells Fargo's acquisition of Wachovia during the 2008 financial crisis. He also keeps a close eye on compliance issues, something that is not always a general counsel's responsibility.

Wells Fargo reached a $190 million regulatory settlement over the phony accounts in September, and parted ways with Stumpf the following month.

It is now working to answer questions from politicians and regulators, replace a flawed compensation system that incentivized employees to open phantom accounts, and repair its reputation among customers, including municipalities that have cut business ties.

Because he turned 65 this year, Strother would ordinarily be required to retire at the end of the year, according to an internal policy at Wells Fargo affecting members of the bank's operating committee.

However, the bank occasionally makes exceptions to this rule in extraordinary situations. During the financial crisis, then-Chairman Dick Kovacevich postponed his retirement by slightly more than a year.

(Reporting by Dan Freed in New York; editing by Gary Grosse and Andrew Hay)