No 'pattern of retaliation' against whistleblowers - Wells Fargo report

Cornelia Mascio
Aprile 20, 2017

A woman walking into a Wells Fargo bank in Washington, DC. It showed that current and former employees were pressured by the unrealistic sales goals imposed by the company the pushed them to the unethical behaviour.

Because of the bank's decentralized structure, the problem went unnoticed for a long time. The report repeatedly faulted Tolstedt, calling her "insular and defensive" and unable to accept scrutiny from inside or outside her organization.

The board said it was not aware of the scope of the problem - that about 5,300 employees had been dismissed for creating sham accounts - until the September 2016 settlements with authorities.

"The trust customers, employees and investors place in Wells Fargo is paramount, and our work to rebuild and strengthen those relationships continues in earnest", Sanger said. Wells' board of directors said both executives dragged their feet for years regarding problems at the second-largest US bank and were ultimately unwilling to accept criticism that the bank's sales-focused business model was failing.

Lawyers for the law department who dealt with firings related to sales integrity issues realized around 2011 that sales pressure was causing problems, but they underestimated the need to more directly confront the issues, according to the report.

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.

The report largely exonerated chief executive Tim Sloan, who was portrayed as trying to get a grasp on the extent of the problem and as less deferential to Tolstedt than predecessor Stumpf. As president and chief operating officer, he became Tolstedt's immediate supervisor in November 2015.

In the aftermath of the scandal surfacing, the bank has: promoted Tim Sloan as chief executive; named Mary Mack as head of community banking; split the positions of chairman and chief executive; added two board members; eliminated retail product sales goals in community banking; and also terminating for cause on February 21 four senior managers in the community bank.

Asked about the timing of Stumpf's options exercise, Stephen W. Sanger, the board's chairman and leader of its investigation, said in a news conference Monday that it was a routine move that did not raise concern.

The other problem, the board found, is that Stumpf's long history with Tolstedt "influenced his judgment", causing him to ignore doubts about her leadership that were raised from the bank's lead independent director and head of its risk committee about her leadership.

In reality, more than 2,500 employees had been fired those years, according to the report.

The board's report, which praised changes the bank has made since the sales scandal erupted, is unlikely to quell the bank's critics.

Two influential advisory firms have also recommended significant changes to the company's board. That report, sent to Wells Fargo's chief auditor, HR personnel and others, described an "incentive to cheat" that was "based on the fear of losing their jobs" if they didn't make their targets.

Wells Fargo gave managers wide latitude to run their divisions.

Witnesses interviewed as part of the report cited daily and monthy "Motivator" reports as a source of pressure, so much so that some "lived and died by" the Motivator results.

"When you violate your code of ethics at Wells Fargo, you don't have an opportunity to come back", said Sloan, 56.

Together with an earlier round of punishments of the two senior executives, Wells Fargo has clawed back a total of $69 million from Stumpf and $67 million from Tolstedt. This demands answers. Elizabeth Warren, are you listening?

Tolstedt declined to be interviewed for the investigation, the board said, on advice from her lawyers. But other investigations - including criminal inquiries by the Justice Department and several state attorneys general - remain in progress.

Wells Fargo had agreed September 8 to pay a combined $185 million in fines to resolve regulatory complaints about 1.5 million potentially fraudulent customer checking and 623,000 credit-card accounts.

The report also says that problems in the bank's sales culture date back to at least 2002, far earlier than what the bank had previously said.

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