Viernes, 17 Agosto, 2018

Fake accounts case: Wells Fargo claws back another $105m in pay

Wells Fargo CEO John Stumpf testifies on Capitol Hill in Washington before the Senate Banking Committee. In the results of an investigation released Monday Wells Fargo's 'Jump into January' a grim start to year; damning report reveals a 'breeding ground for bad behavior'
Manuel Armenta | 12 Abril, 2017, 20:24

This report will add to the pressure for more change on the Wells board.

Former CEO John Stumpf, who left the bank in October, will pay an additional $28 million, while the former head of community banking, Carrie Tolstedt, will return $47 million in stock options on top of the $19 million she agreed to pay back after stepping down previous year, according to a report by the Wells board of directors. Now, Wells Fargo says it will "claw back" an additional $28 million from Stumpf.

Feuer's office past year settled a lawsuit it brought against the bank after some of its employees created more than two million unauthorized accounts as a way to meet aggressive sales goals set by management. Although the law department is far from alone in the blame, the Shearman team repeatedly knocked the department under former general counsel James Strother for failing to see a pattern and recognize the seriousness in a growing number of incidents beginning in 2011 related to improper sales practices.

"It was common to blame employees who violated Wells Fargo's rules without analyzing what caused or motivated them to do so". The ex-CEO was not yet giving his comments about the report. Tolstedt's attorney was defiant. "A full and fair examination of the facts will produce a different conclusion", Enu Mainigi, Williams & Connolly LLP, attorneys for Tolstedt, said in a statement. At least two major shareholder services groups have called for the board to replace between six and 12 members as part of resolving the scandal. Stumpf cooperated with the board's investigation; Tolstedt declined to be interviewed.

"Despite the clawback, I still feel that Stumpf is getting off easy", said Sarah Anderson, global economy project director for the Institute for Policy Studies, a social justice think tank.

The bank fired many low-ranking employees for opening the fake accounts, but there was little questioning of the role of perverse incentives as a factor in the scandal.

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.

The internal bank investigation was released just days after an influential shareholder advisory firm said that board members failed to properly oversee the bank and could have done more to prevent "unsound retail banking sales practices".

In the 110-page report, Stumpf was described as blinded by Wells Fargo's cross-selling success. "Certain managers made meeting scorecard requirements their sole objective, a tactic referred to as 'managing to the scorecard, '" the report said. In September, Wells Fargo agreed to pay $185 million in fines over the scandal, which has tarnished the bank's reputation, led to Stumpf's retirement and spurred multiple investigations and lawsuits.

In case you need a refresher on what Wells Fargo did to warrant congressional hearings, a nine-figure fine, and a $110 million class action settlement, the problem was rooted in an overly aggressive sales culture that had come to dominate the bank.

Tolstedt also put in place a system of sales scorecards, which measured people against impossibly high goals. In one detail revealed by the report, a branch manager had a teenage daughter with 24 accounts and a husband with 21. The board repeatedly faulted Tolstedt, calling her "insular and defensive" and unable to accept scrutiny from inside or outside her organization. Still, he wrote in 2013 that he should have pushed Tolstedt to do more about sales problems.

The report criticized the board for not centralizing risk functions at the bank earlier, not requesting more detailed reports from management and not insisting Stumpf get rid of Tolstedt sooner. "This underreaction to sales practice issues resulted in part from the incorrect belief, extending well into 2015, that improper practices did not cause any "customer harm". "I think they should have given up a significant amount of pay as well, but they don't seem to be inclined" to do that, he said.

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. However, many employees "left due to their concerns" over the scandal or because of the bank's stratospheric sales goals.

But the bank is still under pressure.

The unauthorized bank products included checking accounts, savings accounts and credit cards and carried various fees.