Wells claws back $75 million from top execs in sales scandal
- Author: Todd Kelly Apr 13, 2017,
Apr 13, 2017, 1:25
According to the report called Independent Directors of the Board of Wells Fargo & Company Sales Practices Investigation Report, employees has opened legions of accounts without customer permission and Tolstedt was in charged of the employees.
The law firm of Shearman & Sterling LLP assisted the bank in the investigation, conducting 100 interviews of current and former managers, employees, board members and other relevant parties. Additional "mass terminations" continued sporadically over the next decade until Wells Fargo was fined $185 million by regulators past year.
Wells Fargo's findings are an ignominious career finale for Tolstedt, who was a fixture on Fortune's annual Most Powerful Women list, ranked at No. 27 as recently as 2015, recognized as the most powerful female banker in the U.S.at the time.
Many current and former employees have talked of intense and constant pressure from managers to sell and open accounts, and some said it pushed them into unethical behavior.
The board's law firm is still looking into reports that the bank retaliated against some former employees who tried to blow the whistle on its wrongdoing.
"This is the Wells Fargo Investigative Report".
Some Wells Fargo branch employees have described health problems they experienced because of the crushing pressure of the bank's sales culture, and the report offers glimpses of how bad things were.
In January, the board took the unusual action of publicly firing four executives whom the board said had major roles in the bank's sales practices at the center of the scandal.
"Public Citizen welcomes a clawback of pay from former CEO John Stumpf and community bank unit leader Carrie Tolstedt".
Wells Fargo & Company announced that Lisa McGeough has been named head of its new Financial Institutions Group (FIG), effective April 10. "As we get further away from the crisis", he said, "I can't see how they're going to be much more committed to that process".
Wells Fargo CEO Tim Sloan told CNNMoney during a conference call on Monday it was "very frustrating" to learn that these early warnings detailed by the board went unheeded. The company will "continue to review the report and incorporate its key findings", he said.
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. In 2007, William McGuire of UnitedHealthGroup was forced to give back $US618 million over backdating options.
Along with an earlier round of punishments of the two executives, Wells Fargo has clawed back a total of $69 million from Stumpf and $67 million from Tolstedt.
Ex-CEO Stumpf has forfeited an additional $28 million in incentive pay under a long-term incentive program, after the bank's board of directors already clawed back $41 million, according to the 113-page report. Federal prosecutors are considering criminal or civil charges against the company, the Labor Department is investigating whether it illegally fired employees who reported the wrongdoing, and several cities and states, including California, have stopped doing business with the bank for now.
Meanwhile, Ms Tolstedt "did not like to be challenged or hear negative information".
The report also found that Tolstedt actively worked to downplay any problems in her division.
That report was sent to, among others, the chief auditor, a senior in-house employment lawyer, retail bank HR personnel and the head of retail bank sales & service development.
Stumpf also received his share of criticism. But many others "left due to their concerns", or as a result of the bank's longtime emphasis on selling more products, he said. Under Stumpf, Wells operated in a decentralized fashion, with executives of each of the businesses running their divisions nearly like separate companies.
"It was convenient.to blame the problem on low quality and unauthorized accounts, and other employee misconduct on individual wrongdoers and poor management in the field, rather than on the community bank's sales model".
The internal bank investigation was released just days after an influential shareholder advisory firm said that board members failed to properly oversee the bank.
Multiple board members felt misled by a presentation by Tolstedt and others to the risk committee in May 2015.