Wells claws back $75 million from top execs in sales scandal
Wells claws back $75 million from top execs in sales scandal
Here's how Wells Fargo workers created fake accounts
18 April, 2017, 03:07
Wells Fargo is "clawing back" $75 million in salary paid to its former CEO and another top executive after a board investigation into the bank's unauthorized accounts scandal. 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.
The other problem, the board found, is that Stumpf's long history with Tolstedt "influenced his judgment", causing him to ignore doubts about her leadership that were raised from the bank's lead independent director and head of its risk committee about her leadership.
Wells Fargo's board said in a report that Stumpf had turned a blind eye to the fraudulent accounts being created under his nose, and that Tolstedt, who ran the branch system, had focused obsessively on sales targets and withheld information from her boss and the board.
But the report notes these actually go back to at least 2002.
Tolstedt's lawyer, Enu Mainigi of the Washington firm Williams & Connolly, issued a statement challenging the board's findings.
For a lack of a better description, management appeared to not care that employees were opening duplicate accounts or issuing products to customers that they did not want, as long as employees were making their numbers. And: "Tolstedt effectively challenged and resisted scrutiny both from within and outside the Community Bank".
The independent board members who spearheaded the internal investigation acknowledged in the report that they too were slow to aggressively call for changes at the bank.
The report criticized the board for not centralizing risk functions at the bank earlier, not requesting more detailed reports from management and not insisting Stumpf get rid of Tolstedt sooner. Stumpf already had agreed to give up $41 million in compensation, and Tolstedt had agreed to give up $19 million.
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Neither Tolstedt, who was allowed to retire in July but was subsequently fired, nor Stumpf, who was permitted to retire in October after being castigated during congressional hearings on the scandal, was available on Monday to comment.
The bank was also fined by the Los Angeles City Attorney and the U.S. Comptroller of the Currency.
"While we have already made significant progress in making things right with customers and addressing issues, including several issues identified in the investigation, the board's comprehensive findings provide another important opportunity to learn from our mistakes and take action to improve the way we operate, serve customers, and lead our team members", said Wells Fargo CEO and President Tim Sloan. The law firm searched more than 35 million documents. But the Wells Fargo employees who felt the hardest blowback from the scandal are the fired retail-level bankers who were under constant, unrelenting pressure to meet impossible sales goals. 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".
In the aftermath of the scandal surfacing, the bank has: promoted Tim Sloan as chief executive; named Mary Mack as head of community banking; split the positions of chairman and chief executive; added two board members; eliminated retail product sales goals in community banking; and also terminating for cause on February 21 four senior managers in the community bank.
The executives were also blasted for cultivating an atmosphere of unrealistic expectations at the bank.
Stumpf also received his share of criticism.
The roots of the problem, the report said, was the autonomy given to Wells Fargo's community banking division and the apathy of senior executives who downplayed the problems. Bank officials said the cash incentive pay is synonymous with cash bonuses.
An investigation conducted by outside investigators concluded that the leaders of the company had not acted swiftly to contain the problem.
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