The following is an excellent article written by Nathan Bomey and Kevin McCoy on the USA Today website on April 10, 2017 titled “Wells Fargo Clawing Back $75.3 Million More From Former Execs in Fake Accounts Scandal” and I quote:
“Wells Fargo clawing back $75.3 million more from former execs in fake accounts scandal”
Watch the headlines since the news broke. Time
At Wells Fargo, two former executives are giving back and some of its once former employees are going back.
Wells Fargo said Monday it is clawing back $75.3 million in additional compensation from top former executives after an internal investigation of the bank’s unauthorized accounts scandal found that the ex-leaders acted too slowly to investigate allegations of “improper and unethical behavior” in retail sales practices reaching back more than a decade.
The clawbacks are among the highlights of a report that said aggressive sales practices in the community banking division of Wells Fargo (WFC) for years distorted “culture and management performance” and “created pressure on employees to sell unwanted or unneeded products to customers, and, in some cases, to open unauthorized accounts.”
Also on Monday, Wells Fargo CEO Tim Sloan said that roughly1,000 employees who left the bank over the questionable sales procedures have been rehired.
Produced by independent board members of the bank, along with outside legal investigator, the report 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 that ultimately led to millions of dollars in fines, plus lawsuits and additional investigations.
Wells Fargo board Chairman Stephen Sanger also acknowledged in a Monday conference call with reporters that board members “could have pushed more forcefully to change leadership at the community bank.”
While conceding he could not “promise perfection” in the efforts to regain trust from customers and regulators, Sloan said, “I’m very confident we’re on the right track.”
He succeeded former CEO John Stumpf who resigned in October amid the scandal fallout. Stumpf will lose an additional $28 million in compensation beyond the $41 million and 2016 bonus he previously agreed to forgo, the report said.
The report also said the bank has canceled $47.3 million in additional stock options owed to Carrie Tolstedt, who previously headed the community banking division where the scandal erupted. Tolstedt, who previously lost $19 million in compensation, resigned in June.
The report’s findings compound the San Francisco-based bank’s crisis ahead of an April 25 annual meeting, where board members will stand for reelection. Stockholder advisory group Institutional Shareholder Services last week recommended that Wells Fargo shareholders vote against re-election for 12 of the company’s 15 directors. Wells Fargo, which is scheduled to report quarterly earnings on Thursday, last week rejected the ISS recommendation.
Stumpf could not be reached for comment. However, Stumpf “took responsibility” for the improperly aggressive practices, and was “totally cooperative” with investigators, said Stuart Baskin, a Shearman & Sterling law firm partner involved in the bank’s internal investigation.
Tolstedt declined to be interviewed on the advice of legal counsel, Baskin said. An attorney for Tolstedt, Enu Mainigi, in a formal statement said: “We strongly disagree with the report and its attempt to lay blame with Ms. Tolstedt. A full and fair examination of the facts will produce a different conclusion.”
In all, Wells Fargo has acknowledged it may have opened up to 2.1 million accounts without customers’ permission, along with unwanted credit cards and other financial products. The sales resulted from community bank managers pressing lower level bank employees to meet aggressive cross-selling targets that for years had made Wells Fargo the envy of the banking industry as the sales boosted the bank’s bottom line.
But the sales practices also triggered numerous complaints from employees. Spurred in part by a December 2013 report on the practices by the Los Angeles Times, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau and the Los Angeles City Attorney’s office hit Wells Fargo with $185 million in fines and penalties last year.
At that time, Wells Fargo acknowledged that an estimated 5,300 employees had been fired as the magnitude of the sales excesses emerged. Many bank workers complained that they had been victimized for acceding to their bosses’ sales demands. Tolstedt allegedly “minimized and understated” the problems in a 2015 report to the board, whose members only learned of the extent of the employee firings when regulators penalized Wells Fargo last year.
The bank took action after the penalties, launching its internal probe even as lawsuits mounted and new investigations by the Department of Justice and the Securities and Exchange Commission got underway.
In addition to clawing back compensation from Stumpf and Tolstedt, the bank on Feb. 28 reduced compensation for eight current executives by $32 million, including eliminating 2016 bonuses and halving 2014 performance payouts. Although the internal report found that Sloan’s “direct involvement with sales practice issues was limited,” his 2016 bonus and 2014 performance share payouts were reduced as part of the compensation cuts.
Additionally, Wells Fargo in January overhauled its compensation plan to remove financial incentives for aggressive sales of financial products to customers. Four present or former senior managers were fired the following month for their alleged involvement in the scandal. On Monday, Sanger said no additional firings or compensation clawbacks are planned.
As part of the investigation, Shearman & Sterling conducted 100 interviews with current and past workers, reviewed more than 35 million documents and coordinated with FTI Consulting to conduct forensic analysis of the bank’s digital archives.
Wells has previously acknowledged that aggressive sales incentives and pressure prompted many frontline bank employees to open fake accounts to meet their goals. The report focused on that issue at length, blaming senior executives for tolerating “low-quality accounts” and failing to terminate the people responsible for them.
The internal report singled out Tolstedt for allegedly having been “insular and defensive” and having “effectively challenged and resisted scrutiny from within and outside” her community banking division.
Stumpf downplayed problems and failed to investigate the allegedly unethical activity when the possibility of problems came to his attention, according to the report. “Stumpf’s long-standing working relationship with Tolstedt influenced his judgment,” leading him to stand by her even though “he was aware that many doubted that she remained the right person” to continue leading the division involved in the scandal, the report concluded.
When an internal investigation launched after the Los Angeles Times report revealed that about 1% of Wells Fargo employees were fired annually for sales integrity violations, Stumpf and Tolstedt “received the figure positively,” according to the bank’s internal probe.
“Stumpf was by nature an optimistic executive who refused to believe that the sales model was seriously impaired,” the report said. “His reaction invariably was that a few bad employees were causing issues, but that the overwhelming majority of employees were behaving properly. He was too late and too slow to call for inspection of or critical challenge to the basic business model.”
While the report tried to close a chapter on major parts of the scandal, at least one issue remains. Shearman & Sterling investigators have not identified a pattern of retaliation against Wells Fargo employees who complained about the sales practices. But interviews and record-checking involving potential whistleblowers are continuing, the report said.
Follow USA TODAY reporters Nathan Bomey and Kevin McCoy on Twitter:”
(WHILE WELLS FARGO DID HAVE TO PAY SOME FINES, ONCE REPUBLICAN PRES DONALD TRUMP GETS RID OF REGULATIONS, YOU CAN BET WELLS FARGO WILL BE BACK TO BUSINESS AS USUAL AND THE CEOs AND EXECUTIVES WILL BE GETTING HUGE SALARIES AND BONUSES. EVEN THOUGH THE WHISTLEBLOWERS WILL BE REPORTING CRIME, NOTHING WILL GET DONE. LOOK FOR ANOTHER 2008 BANK BAILOUT ONLY LARGER.
LaVern Isely, Progressive, Overtaxed, Independent Middle Class Taxpayer and Public Citizen Member and USAF Veteran