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20 April 2017, 09:42 | Jan Cross
Former Wells Fargo CEO John Stumpf and other executives were unwilling to change the bank's business culture that led to the opening of millions of fraudulent accounts, an investigation conducted by the company's board of directors revealed Monday.
Wells Fargo is seeking a total of $75 million from former chief executive John G. Stumpf and its former head of community banking, Carrie L. Tolstedt.
Wells Fargo said Tolstedt had been fired for cause and it would cancel approximately $47 million worth of stock options held by her.
The announcement came in a report released by the board that named Stumpf and Tolstedt as the two most prominent senior executives who have left the company due to their roles in the scandal.
But still, not everyone is convinced this is enough. Better Markets, a nonprofit organization that advocates stricter regulation of Wall Street, called the report a compendium of "too-little, too-late cosmetic actions" and called on shareholders to oust all of Wells Fargo's board members at the company's annual meeting this month.
Mr. Stumpf, relying on the banks decades of success with cross-sell and positive customer and employee survey results, was too slow to investigate or critically challenge the sales practices at the community bank and to appreciate the seriousness and the substantial reputational risk to Wells Fargo, says the report.
In September, the Labor Department said it opened an investigation after authorities accused the San Francisco-based company of putting excessive pressure on branch workers to sell products and financial services. As ThinkProgress' Alan Pyke wrote, these poorly compensated employees faced a bad choice: "do the job correctly and get fired, or lie and maintain a steady income".
Wells Fargo acknowledged in its report Monday that it had profited by dipping into customers' authorized accounts to collect fees for the bogus accounts it created.
Another warning sign that went unheeded from the August 2004 internal investigation report: Wells Fargo had been losing in court when it tried to deny unemployment benefits to employees fired for sales abuses. Instead, she reinforced the high-pressure sales culture.
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That report was sent to, among others, the chief auditor, a senior in-house employment lawyer, retail bank HR personnel and the head of sales & service development in the retail bank.
Wells Fargo's board, which commissioned the report, also is under fire.
He and his committee members didn't get much support from the rest of the board, the investigators imply, even after Hernandez concluded that Tolstedt had been "intentionally misleading the board".
"The self-investigation and actions reported today by the Board of Directors of Wells Fargo are grossly deficient". The board investigation found that additional "mass terminations" and individual firings for gaming Wells Fargo's sales goals "continued sporadically over the next 10 years".
That recommendation came after proxy advisory firm Glass Lewis suggested shareholders vote against six directors, including four who sat on the corporate responsibility committee.
Lawyers in the enterprise sales division warned the board in 2014 that sales practices carried a "noteworthy risk," the report said.
"The law department's focus was principally on quantifiable monetary costs-damages, fines, penalties, restitution", the report said.
It's the deepest autopsy yet as Wells Fargo's leaders seek to rebuild customer and investor trust after the bank agreed to pay $US185 million in fines in September, triggering a national scandal. The board members said they left thinking that between 200 and 300 employees had been fired for sales practice abuses and the problem was largely concentrated in southern California. According to the report, the employees opened up to two million checking and credit card accounts without the consent of the customers. Her report to the board in October 2015 "was widely viewed by directors as having minimized and understated problems at the community bank", the report said.
Senior executives did not tell the board that the problems plaguing the community banking division amounted to a "noteworthy risk" until 2015, the report found.
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