Wells Fargo orders former execs to pay back $75 million
- Author: Zachary Reyes Apr 11, 2017,
Apr 11, 2017, 17:37
Wells Fargo said Monday that two former senior executives, including its long-time CEO John Stumpf, must return an additional $75 million in compensation after a scathing internal report found the bad sales practices that have rocked the mega bank date back far longer than initially acknowledged.
The board's report recommended that Stumpf and Tolstedt have additional compensation clawed back for their negligence and poor management.
The law firm of Shearman & Sterling LLP assisted the bank in the investigation, conducting 100 interviews of current and former managers, employees, board members and other relevant parties. Management was also slow to inform the board about the serious nature of the problem, including the firing of thousands of lower-level employees over sales practices, the report said.
Wells Fargo is still reeling from the disclosure a year ago that it opened up to 2.1 million customer accounts without their permission. She "mismanaged" the bank's response to the aggressive sales tactics that seemed to breed bad behavior, submitting reports to the board that were "viewed by many as misleading".
Tolstedt declined to be interviewed for the investigation, the board said, on advice from her lawyers.
"We strongly disagree with the report and its attempt to lay blame with Ms. Tolstedt".
Sloan spoke with reporters on Monday after the bank's board issued a report on its investigation into a massive sales scandal that placed the blame largely on now-departed executives.
The Board reports that several steps have already been taken to remedy the fake account fiasco - including a recent $110 million settlement to put an end to the many federal lawsuits.
Feuer's office past year settled a lawsuit it brought against the bank after some of its employees created more than two million unauthorized accounts as a way to meet aggressive sales goals set by management.
"The community bank identified itself as a sales organization, like department and retail stores, rather than a service-oriented financial institution", according to the report.
Appearing before the House Financial Services Committee in September 2016, Stumpf was subjected to a confrontational five-minute round of questioning by Rep. Keith Ellison that yielded few satisfactory answers for the congressman.
The report reveals that the Wells Fargo board at the time was asleep and lazy and didn't heed warnings from down the line staff and ignored reports of the fake accounts scam well before they reached the desks of regulators in California and Washington.
Ideally, Wells Fargo wanted each customer household to have eight products with the bank, from credit cards to savings accounts. Before leaving the bank in 2016, she was forced to forgo about US$19 million (AU$25 million). "The board has total confidence in management, and while this investigation has concluded, our oversight of the company and commitment to accountability are stronger than ever".
As for how executives responded to problems within the sales division, the report states, "Tolstedt and certain of her inner circle were insular and defensive and did not like to be challenged or hear negative information".
The report says supervisors placed intense pressure on employees to increase sales, even to the point of calling them several times each day to demand a progress report. In January, the board fired four executives the board said had ties to the scandals.
The report said department heads such as Tolstedt were given power to run their divisions with little oversight. The only members it advised investors to vote for are the two who were elected after the sales-practices scandal broke, and Sloan, who was appointed as CEO after Stumpf stepped down. "This hampered the ability of control functions outside the Community Bank and the Board to accurately assess the problem and work toward a solution", the board said. After the Los Angeles City Attorney filed a suit over the bank's sales practices in May 2015, he sent an email to Sloan vowing to fight the suit.
In the call with reporters, Sanger highlighted other actions taken by the bank, including the elimination of the sales goals that helped produce the scandal.