Wells Fargo Rescinds Millions More From Former Execs Over Scandal


The total executive compensation clawback has risen to more than $180 million.

The report said Tolstedt hid the scale of the misconduct from the board, which only discovered that 5,300 staff had been fired for opening more than 2 million unauthorized accounts when the bank reached a $185 million settlement with regulators in September past year.

The bank said it had canceled $47.3 million in additional stock options owed to former community banking chief Carrie Tolstedt, who had already lost $19 million in compensation.

The investigation found that Wells' corporate structure wasn't working because executives of other divisions, under Stumpf's leadership, were running them as separate companies.

"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", the report states. The report said "mass terminations" "continued sporadically over the next 10 years". The board found a branch in Colorado was issuing debit cards to customers without their consent, and branch management encouraged the behavior. "His reaction invariably was that a few bad employees were causing issues".

The recovery of the disbursed funds, known as a claw back, comes after a six-month investigation of the bank's sales tactics.

The bank's board of directors also faces a shareholders' vote that will decide which members remain, as Wells Fargo meets April 25 for its annual shareholders meeting in Ponte Vedra Beach, Florida.

According to the report, multiple board members felt misled by a presentation by Tolstedt and others to the board's risk committee in May 2015.

After the scandal came out, the company's now-former CEO even announced his sudden plan for retirement, saying "My immediate and highest priority is to restore trust in Wells Fargo".

The report is unlikely to quell the criticism aimed at Wells Fargo.

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Sloan said he supported the board's actions on the cash bonuses and believes "they are critical to Wells Fargo's commitment to our customers".

In the investigation, law firm 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.

According to today's report, "the Board only learned that approximately 5,300 employees had been terminated for sales practices violations through the September 2016 settlements with the Los Angeles City Attorney, the OCC and the CFPB". On Monday, the Washington Post reported that the bank's internal report had been completed and it was pretty damning: Not only will two executives have to return $75 million in compensation, but the report determined that the bank knew about the fake account epidemic all the way back in 2002.

Stumpf told Congress last September that he is "fully accountable for all unethical sales practices" and acknowledged he should have done "more sooner" to address this.

An investigation conducted by outside investigators concluded that the leaders of the company had not acted swiftly to contain the problem. As NPR reports, the bank now says it has "recovered more than $180 million in executive compensation over the scandal" - roughly the amount of total fines imposed on Wells Fargo by CFPB previous year.

"We strongly disagree with the report and its attempt to lay blame with Ms. Tolstedt".

The report said department heads such as Tolstedt were given power to run their divisions with little oversight.

Scrutiny of Wells Fargo, and skepticism about the bank, are likely to continue, according to analysts. Stephen Sanger, who had been the lead director on Wells' board since 2012, became the company's independent chairman.

As for Stumpf, the board determined he was too focused on the "bank's decades of success with cross-sell and positive customer and employee survey results". "She and her group risk officer not only failed to escalate issues outside the Community Bank, but also worked to impede such escalation". A careful reading of the report reveals a board that took months, even years, to get its arms around the scandal despite plenty of warnings about its nature magnitude.