Wells Fargo Knew About Fake Account Problem For 15 Years
- Author: Zachary Reyes Apr 13, 2017,
Apr 13, 2017, 9:33
Many current and former employees have talked of intense and constant pressure from managers to sell and open accounts, and some said it pushed them into unethical behavior. But Monday's report indicates that additional employees were fired for similar activity years earlier.
Another warning sign that went unheeded from the August 2004 internal investigation report: Wells Fargo had been losing in court when it tried to deny unemployment benefits to employees fired for sales abuses.
Patricia "Pat" Callahan: Described by Stumpf as a confidante, she held a number of senior posts and led Wachovia Corp.'s integration from 2008 before becoming chief administrative officer in 2011. The bank's board members earn about $300,000 to $480,000 in cash and stock every year.
The result was a "relentless focus on sales, abbreviated training and high employee turnover", the report said, adding that the bank was at times run more like a department store than a financial institution. The $28 million that the board is taking back from Stumpf - the proceeds of a 2013 equity grant - will be deducted from his retirement plan payouts, Sanger said. Federal prosecutors are considering criminal or civil charges against the company, the Labor Department is investigating whether it illegally fired employees who reported the wrongdoing, and several cities and states, including California, have stopped doing business with the bank for now.
Both Stumpf and Tolstedt had previously been forced to return tens of millions of dollars. Tolstedt will lose $47.3 million in stock options, on top of $19 million the board had already clawed back.
The bank will recoup a total of $180 million in executive compensation in the wake of the scandal. At one point, Tolstedt found out and told her to stop talking with him, the authors wrote. Other problems cited by investigators included a community-bank leadership that "resisted and impeded outside scrutiny or oversight" and a corporate CEO who was slow to investigate or critically challenge sales practices. "Certain managers made meeting scorecard requirements their sole objective, a tactic referred to as 'managing to the scorecard, '" the report said. Tolstedt, who declined to be interviewed for the investigation, rejected its conclusions in a statement from her attorney.
Multiple board members felt misled by a presentation by Tolstedt and others to the risk committee in May 2015.
Stumpf was grilled by the U.S. Senate Banking committee on September 28, drawing criticism from the committee for "failing to answer many questions".
On at least one key issue, Ellison said Wells Fargo has indicated that it is not committed to meaningful change.
Meanwhile, the board could find nothing worse to say about Stumpf than that he "was by nature an optimistic executive" who "nonetheless moved too slowly to address the management issue".
McGeough, who joined Wells Fargo in 2005, is now head of the Industrials Group for Corporate Banking.
Wells Fargo gave managers wide latitude to run their divisions. The OCC's goal is to see whether the problems at Wells were isolated. The thinking was that accounts were being opened even when customers didn't want them and in many cases didn't even know about.
Wells Fargo has sought to fix its corporate structure by putting more checks and balances under central control and prohibiting Sloan and future leaders from holding the dual roles of chairman and CEO like Stumpf did.
Stumpf, who retired under pressure from the scandal in October, was criticized for failing to grasp the gravity of the sales abuses and their impact on the bank. In January, the board fired four executives the board said had ties to the scandals.
It's another example of how Wells Fargo executives repeatedly proved unable - or unwilling - to take the hard actions required to fix major flaws the bank's cultural and incentive problems that fueled the scandal.
Last week, a federal regulator, the Occupational Safety and Health Administration of the Labor Department, ordered Wells Fargo to reinstate and pay $5.4 million to a former employee who said he was sacked after making internal complaints about wrongdoing that he observed.
The 2004 report was sent to Wells Fargo's chief auditor, HR personnel and others. Whereas most banks could claim perhaps only three accounts per customer, Wells Fargo "grew our 2012 cross-sell ratio to a record 5.98 products per household", Stumpf said in April 2012.
Ken Sweet is the banking and consumer financial issues writer for The Associated Press. It responded, "Wells Fargo does not believe our team members need a third party to represent them in matters involving terms and conditions of employment".