Wells Fargo claws back $75 million from former CEO and top exec

Posted April 15, 2017

Monday's news about Wells Fargo (WFC) is certainly damning: the bank announced that it is "clawing back" another $75 million from two top executives, former CEO John Stumpf and community bank executive Carrie Tolstedt, excoriating them for playing key roles in the scandal whereby the bank set up unauthorized accounts for customers. Then-CEO John Stumpf was dragged in front of both the Senate and House of Representatives to testify, where politicians on both sides of the aisle called for criminal charges to be brought against the bank and its executives.

Two executives who were publicly excoriated over Wells Fargo's opening of millions of bogus accounts must give back millions more dollars in pay, the bank's board announced Monday.

In a scathing 113-page report that made it clear the warning signs had been glaring, the board released the results of a six-month investigation into the conditions and culture that prompted thousands of Wells Fargo employees to create fraudulent accounts in an effort to meet aggressive sales goals.

Together with an earlier round of punishments, Wells Fargo has clawed back a total of US$69 million from Mr Stumpf and US$67 million from Ms Tolstedt.

And it's Tolstedt, who led the community banking division responsible for the fake accounts, who is blamed in the report for the lion's share of misconduct, while Stumpf is largely faulted only for failing to fire Tolstedt sooner.

"Tolstedt effectively challenged and resisted scrutiny", the report said, describing Tolstedt and members of her "inner circle" as "insular and defensive".

"We'll continue to do that", he said.

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. Shareholder advisory groups Institutional Shareholders Services and Glass Lewis have recommended the ousting of several board members.

Among its regional bank-wide sales campaigns, Wells Fargo & Co's "Jump into January" program was notorious for the impact it had on staff.

Jeff Mayweather Fires Back at Dana White Over McGregor Split
Most fans might not know Jeff as much as his nephew's father Floyd senior or his other boxing uncle Roger Mayweather. McGregor now has a boxing license and Mayweather has officially come out of retirement, but only to fight McGregor.

The report says Mr Stumpf was aware of a Wells branch in the American state of Colorado in 2002 where internal investigators found "almost an entire branch" had engaged in a form of "gaming", with some employees issuing debit cards to customers without their consent. In all, 5,300 employees were fired due to sales practice violations, a figure the board did not learn of until the bank settled with regulators in September.

Chairman of the Board Stephen Sanger said that this exhaustive investigation identified serious issues related to Wells Fargo's decentralized structure and the sales culture of the Community Bank, all of which the Board and management have been working diligently to rectify.

"From the moment we sued Wells Fargo over fake accounts through the time we resolved the case, the bank seemed determined to blame and fire low-level employees, rather than take responsibility at the top", Feuer said in a prepared statement.

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

The report said Shearman & Sterling is completing reviews of nine employees who reported being fired after calling Wells Fargo's ethics line phone number to submit tips about unethical sales practices. After a Los Angeles Times story cast a spotlight on sales abuses in 2013, she pushed to address the problem and limit reputational damage, writing in an email that she hoped the story "doesn't become national".

"The self-investigation and actions reported today by the Board of Directors of Wells Fargo are grossly deficient".

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.

Sanger said that the board's report on Monday concluded almost all of its investigation and that no further terminations or compensation clawbacks are expected.