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

Wells Fargo has released a 110-page report analysing the scandal that involved the opening of about two million fake accounts.
Wells Fargo has released a 110-page report analysing the scandal that involved the opening of about two million fake accounts.PHOTO: REUTERS

NEW YORK • Wells Fargo took back another US$75 million (S$105.3 million) in pay from two former senior executives who played key roles in the US bank's fake accounts scandal, its board has announced.

The bank said on Monday it had demanded or "clawed back" an additional US$28 million from former chief executive John Stumpf, who led the bank at the time of the scandal, and US$47 million from former community banking chief Carrie Tolstedt, whose division was at the heart of the problem.

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.

The moves came as Wells Fargo, a leader in consumer and mortgage banking, released a 110-page report analysing the scandal that involved the opening of about two million deposit and credit card accounts without the approval or knowledge of customers.

News of the scandal broke in September last year when the bank reached a settlement with regulators to pay US$185 million (S$260 million). Since that time, Wells Fargo has replaced its chief executive and announced a series of reforms, such as eliminating product sales goals in retail banking.

However, the bank continues to face numerous government probes of the matter. The report, undertaken by the Wells Fargo board and with help from the Shearman & Sterling law firm, said Mr Stumpf "was too slow to investigate or critically challenge sales practices in the community bank", nor did he "appreciate the seriousness of the problem and the substantial reputational risk to Wells Fargo".

  • $260m 

    Amount Wells Fargo is to pay after reaching a settlement with regulators.

    5,300

    Number of employees fired due to sales practice violations.

In addition, a decentralised structure gave "too much autonomy to the community bank's senior leadership, who were unwilling to change the sales model or even recognise it as the root cause of the problem".

The report sheds light on how the bank's desire to show strong growth on cross-selling led to ethical breaches and created a brutal sales-first culture.

Managers within the community bank exerted "significant and, in some cases, extreme pressure on employees to meet or exceed their goals", sometimes calling subordinates several times a day to check on sales, the report said.

The bank fired many low-ranking employees for opening the fake accounts. Community bank executives also minimised the extent of the dismissals in their interactions with the board. 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 last September.

The report comes ahead of Wells Fargo's April 25 annual meeting, where board members are facing the risk of a shareholder revolt.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on April 12, 2017, with the headline 'Fake accounts case: Wells Fargo claws back another $105m in pay'. Print Edition | Subscribe