Friday, 22 February, 2019

Wells Fargo Takes Back $75 Million From Former Executives For Scandal

Nellie Chapman | 18 April, 2017, 03:06

Initially created to motivate branch employees to exceed sales goals, the pressure to beat higher daily sales targets instead encouraged them to forge customer signatures, hold off on opening accounts signed for in December and target friends and family to make up the numbers.

So many suspicious things should have added up, the report said: People were not funding, or putting money into, their new accounts at alarming rates. These include an investigation by The Times in December 2013, and a lawsuit filed by Los Angeles City Attorney Mike Feuer in May 2015.

Describing a system that sometimes "imposed excessive pressure" on lower-rung workers during Tolstedt's long tenure, the report says employees in the Community Bank division were ranked against each other on "scorecards" that were updated daily.

"We accept the board's findings as a critical part of our journey to rebuild trust", he said in a statement. With the report's publication, the board yanked even more pay from John Stumpf and Carrie Tolstedt, and the latter was retroactively fired.

Wells Fargo will claw back an additional $75 million from two former executives implicated in the bank's phony accounts scandal.

Today analysts at Piper Jaffray upgraded Wells Fargo & Company's (NYSE:WFC) shares to "Neutral" in a report released to investors. As president and chief operating officer, he became Tolstedt's immediate supervisor in November 2015. Nonetheless, her name is mentioned 142 times in the report.

Asked about the timing of Stumpf's options exercise, Stephen W. Sanger, the board's chairman and leader of its investigation, said in a news conference Monday that it was a routine move that did not raise concern.

The bank has been working to regain its footing since the scandal, but said it opened 43 percent fewer new checking accounts in February compared to the same month a year earlier. Institutional Shareholder Services, a stockholder advisory group, has recommended against the reelection of 12 of the company's 15 directors. The bank is still under investigation by Congress, state and federal authorities.

Wells Fargo's decentralized model was partly inherited from Norwest, when the two banks merged in 1998, the report said. 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.

"Wells Fargo can not quantify with any degree of confidence how many team members raised concerns to their managers about sales goals", the response read. There were similar large-scale terminations for such conduct over the next decade, the report said, yet top executives repeatedly failed to look at what the root problem might be.

Independent board members, paired with outside investigators hired by the company to review its fake accounts scandal, blasted Wells Fargo executives for failing to properly investigate the activity, cultivating an atmosphere of unrealistic expectations and hiding information about the extent of the crisis. Former and current employees recounted facing termination if they didn't meet those goals. This demands answers. Elizabeth Warren, are you listening?

Tolstedt declined to be interviewed for the investigation, the board said, on advice from her lawyers.

Several employees were fired or resigned but not all of them, the report found.

News of the scandal broke in September previous year when the bank reached a settlement with regulators to pay US$185 million (S$260 million).

Wells Fargo needs to take firm and even harsh actions to restore its scandal-scarred reputation, analysts said.

So far, Shearman & Sterling has found no evidence of retaliation, according to Stuart J. Baskin, a partner at the firm.