Wells claws back $75 million from top execs in sales scandal

  • Wells claws back $75 million from top execs in sales scandal

Wells claws back $75 million from top execs in sales scandal

Wells Fargo was aware its aggressive sales goals were problematic as far back as 2002, more than a decade before the bank admitted that its employees had created at least 2 million sham accounts to meet them, according to a tough new 113-page report released Monday by its independent board members.

The report also criticized the bank's decentralized structure that allowed the problem to go unnoticed and pointed a finger at two executives, former CEO John Stumpf and former retail banking leader Carrie Tolstedt, report the New York Times, the Wall Street Journal (sub. req.) and the Washington Post.

The report said that "on April 7, 2017...it was determined that the finding made by the Board on September 25, 2016, that cause existed for terminating Tolstedt's employment was appropriate, with resulting forfeiture of her outstanding stock options awards with a current intrinsic value of approximately $47.3 million". Management was also slow to inform the board about the serious nature of the problem, including the firing of thousands of employees over sales practices.

All told, Wells Fargo senior executives are returning $180 million in pay. Almost two years earlier, on December 1, 2013, Los Angeles Times reporter Scott Reckard published a 2,000-word article detailing the creation of fake accounts and describing the enormous pressure low-level employees were under to hit impossible sales goals.

Tim Sloan, who replaced Stumpf as chief executive, escaped without much critique in the report.

Employee terminations had begun as early as 2002, when nearly every worker at a branch in Colorado was found "gaming" targets - including issuing unauthorized debit cards - while participating in an internal promotion, according to the report. Put another way, while there are few new bombshells in the report, it really hammers home the extent of cultural/reporting structure issues in the bank, as well as questions about how long it will take to turnaround and reinvent the company.

But it didn't stop there. There is a chance that the Justice Department could bring federal charges against Wells, but that is still not clear. The lawyers also combed through hundreds of interviews of lower-level employees that were conducted by Wells Fargo. Additional verification before pulling your credit is a good idea for Wells Fargo or any issuer of credit. Even when he did become aware, the board said, Stumpf did not do enough to address the issues.

"It was common to blame employees who violated Wells Fargo's rules without analysing what caused or motivated them to do so". The disclosures led to customer and consumer lawsuits, cost the bank lucrative government bond deals and have spurred criminal probes.

It doesn't appear Tolstedt, already one of the retail banking division's most senior executives, received that warning, according to the report.

Tolstedt was perceived by high-level employees as having the support of Stumpf, with whom it was considered best to avoid raising problems with.

Tolstedt had previously been lauded by Stumpf as the "best banker in America". "Because of her passion for serving our customers, wherever and however they chose to receive their banking services - online, in branches, or via mobile phones - Carrie leaves Wells Fargo uniquely positioned to continue to be a leader in retail banking, no matter how the future of banking evolves". Nearly half a dozen Wells Fargo workers told CNNMoney past year that they were fired after calling the bank's confidential ethics hotline. African Americans are a part of this customer base for Wells Fargo bank. Most of the employees that were fired admitted that they engaged in misconduct, but frequently said they did so because of the culture at the bank, the report said. The investigators said Stumpf protected Tolstedt.

The Wells Fargo board said it has "total confidence" in the bank's current management, but pledged to maintain strong oversight and accountability going forward.