Wells Fargo Board faults aggressive culture in sales scandal

But executives treated these staffers as rogues, blamed them and treated the problem as not being systemic throughout the bank.

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.

Last year, Wells Fargo was caught creating millions of unauthorized accounts to meet unrealistically high sales goals.

An investigation by The Los Angeles Times in 2013 found that employees had been opening up multiple accounts for customers in order to make their sales goals. Monday's report backs up those employees' stories.

But many employees said they were unfairly punished for speaking out or resisting unrealistic sales quotas.

Carrie Tolstedt set up ruthless sales goals that even she acknowledged were unreachable.

In the 110-page report, Stumpf was described as blinded by Wells Fargo's cross-selling success.

While the report said Stumpf, who spent more than 30 years at the bank, was ultimately responsible for the scandal, it lays much of the blame on Tolstedt, who ran the bank's community banking division, encompassing some 6,000 branches.

Wells Fargo has several outstanding investigations pending, including Congressional investigations, lawsuits by states and consumer groups, as wells as possibly the Department of Justice.

The board's report recommended that Stumpf and Tolstedt have more of their compensation clawed back for their negligence and poor management. Wells will claw back $28 million more in compensation from Stumpf and $47 million more from Tolstedt.

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. For example: "Tolstedt and certain of her inner circle were insular and defensive and did not like to be challenged or hear negative information".




Early Tuesday morning our time, Well Fargo, America's second largest bank, released as long awaited report on the fake customer accounts sales scam that burst into public view last September.

The board said "the investigation identifies cultural, structural and leadership issues as root causes of improper sales practices".

"Throughout 2015 and 2016, the board was regularly engaged on the issue", according to the report. "A full and fair examination of the facts will produce a different conclusion".

The executives, including Sloan and David Carroll, head of wealth and investment management, also could see the value of stock awards received from 2014 to 2016 cut by as much as half. "He also failed to appreciate the seriousness of the problem and the substantial reputational risk to Wells Fargo". The report commended lawyers in the department, however, for working on various committees in "commendable attempts" to address sales misconduct.

In the wake of that settlement, Wells Fargo's board hired law firm Shearman & Sterling to investigate unauthorized account openings and the bank's sales practices. Under Stumpf, Wells operated in a decentralized fashion, with executives of each of the businesses running their divisions nearly like separate companies. Further, Tolstedt was said to have kept hidden the true number of people who were fired for setting up false accounts.

A big part of Wells Fargo's problem was its decentralized business model, which meant the retail bank was able to keep inquiries from head office at arm's length.

The company also split the roles of chairman and CEO.

The actions announced on Monday were the result of a massive, six-month investigation by Wells Fargo's independent directors into the bank's broken culture. Stumpf and Tolstedt had already given up $41 million and $19 million in compensation, respectively. For years, the bank's management would say it doesn't have branches; it has "stores".

The report is unlikely to quell the criticism aimed at Wells Fargo. And last week an influential shareholder advisory firm said investors should vote out almost the entire board of directors when the bank holds its annual shareholder meeting later this month.

Wells Fargo said the review, which looked into media reports and other documents, remains ongoing.

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