The scandal that broke last fall involving Wells Fargo and its aggressive and sketchy sales tactics can mostly be blamed on two former executives according to a new 113-page report released by the bank's board Monday. As the New York Times reports, the scathing account of company policies and multiple blind eyes turned points the finger at former CEO John G. Stumpf, and former head of community banking, Carrie L. Tolstedt, who oversaw the bank's branch network.
The report, which draws on interviews with 100 current and former employees, was compiled by the law firm Shearman & Sterling, and suggests that Stumpf "failed to appreciate the seriousness of the problem and the substantial reputational risk to Wells Fargo." The brunt of the blame, however, seems to fall to Tolstedt, whom the report asserts was the source of many of the unrealistic sales goals that led to branch managers unscrupulous tactics over multiple years.
To wit:
The root cause of sales practice failures was the distortion of the Community Bank’s sales culture and performance management system, which, when combined with aggressive sales management, created pressure on employees to sell unwanted or unneeded products to customers and, in some cases, to open unauthorized accounts. Wells Fargo’s decentralized corporate structure gave too much autonomy to the Community Bank’s senior leadership, who were unwilling to change the sales model or even recognize it as the root cause of the problem. Community Bank leadership resisted and impeded outside scrutiny or oversight and, when forced to report, minimized the scale and nature of the problem.
The Wells Fargo board also announced Monday that it would "claw back" some $75 million in compensation from Stumpf and Tolstedt, including $28 million that would be removed from Stumpf's retirement plan compensation.
As we learned last fall, the scandal involved bank employees frequently opening credit and bank accounts for customers who did not want or need them in order to reach unrealistic quotas, something that Stumpf bragged about back in 2012 saying that the bank "grew our 2012 cross-sell ratio to a record 5.98 products per household," whereas most banks had an average of three products/accounts per household.
While Wells Fargo was founded in New York, the bank has had long ties with San Francisco and a major headquarters here.
In October we learned that a male bank employee in the Bay Area was an early whistleblower in the scandal, writing a letter to superiors in 2007 calling attention to the shady account-creation practices. He ended up winning a 2008 federal whistleblower lawsuit after the bank relocated him in retaliation for his speaking up.
The Times notes that the Occupational Safety and Health Administration of the Labor Department has also ordered Wells Fargo to reinstate another whistleblower who was fired and pay him $5.4 million, and a third woman, fired in 2011 under similar circumstances, should also be rehired, the agency said.
The company’s annual shareholders' meeting happens later this month, and outside groups are encouraging shareholders to oust all or some of the company's current board.
Previously: Bay Area Whistleblower Told Wells Fargo CEO About Bogus Account Problem In 2007
