Fake accounts case: Wells Fargo claws back another $105m in pay
- Author: Zachary Reyes Apr 15, 2017,
Apr 15, 2017, 21:29
Certain members of the Trump administration think the nation would be better off if the biggest banks were broken up.
Managers within the community bank exerted "significant and, in some cases, extreme pressure on employees to meet or exceed their goals", sometimes calling subordinates several times a day to check on sales, the report said. Monday's report backs up those employees' stories.
"Monday's report underscores what we found last fall: that Wells Fargo's cross-selling mania began long before it became public". In 2002, Stumpf knew about a problem in Colorado where employees were terminated for issuing debit cards without customer consent.
Rather than admitting the flaws in the sales model, community banking head Carrie Tolstedt and others found it "convenient instead to blame the problem of low quality and unauthorized accounts and other employee misconduct on individual wrongdoers and poor management in the field", the report found.
Wells Fargo has fired 5,300 employees in connection with the unauthorized accounts, and agreed to pay $185 million to settle federal claims. The board of directors has clawed back more than $180 million in pay and bonuses to former CEO John Stumpf, Tolstedt, current CEO Tim Sloan and others. "Tolstedt effectively challenged and resisted scrutiny both from within and outside the community bank".
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.
Tolstedt's current perspective isn't represented in the report - its authors say she "declined, on advice of counsel, to be interviewed as part of this investigation". The lawyer said that a full and fair examination of the facts would produce a different conclusion.
Stumpf also received his share of criticism. "He was too late and too slow to call for inspection of or critical challenge to the basic business model", the board continued.
The investigation found that Wells' corporate structure was also to blame. According to one director, Stumpf praised Tolstedt as the "best banker in America". Tolstedt, who ran the community bank - Wells Fargo's term for the branch network - was told to fix the problem she had created. Stumpf resigned in October of 2016.
The board is under pressure to show that it's acting decisively. In 2007, William McGuire of UnitedHealthGroup was forced to give back $US618 million over backdating options.
The executives were also blasted for cultivating an atmosphere of unrealistic expectations at the bank. 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 board released Monday a 110-page report that represents its seven-month investigation into how the fraudulent sales practices occurred and persisted.
Yet it took a dozen years - and a national firestorm coupled with Congressional hearings - for Wells Fargo to finally eliminate those now-infamous sales goals, where employees were incentivized to open multiple accounts for each customer.
A Wells Fargo sign is displayed in downtown Los Angeles. After he rose higher, the bank demoted him last month to run a smaller four-state region.
The report comes ahead of Wells Fargo's April 25 annual meeting, where board members are facing the risk of a shareholder revolt.
Lisa Stevens: The regional manager was a "vocal advocate" within the community bank for changing sales goals and the behavior they encouraged, according to the report. It provides other financial services through its subsidiaries engaged in various businesses, including wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, computer and data processing services, investment advisory services, mortgage-backed securities servicing and venture capital investment.