Wells Fargo & Co (NYSE:WFC) traded at a yearly high level of $59.99 during the last trading session. Both were ultimately unwilling to accept criticism that the bank's sales-focused business model was failing. As CFPB noted in its release, bank employees had opened hundreds of thousands of deposit and credit card accounts that had not been authorized by customers. The Monday's report backs up those employees' stories.
He also failed to "appreciate the seriousness and the substantial reputational risk to Wells Fargo", the report states.
According to the report, Stumpf was aware of individual issues as far back as 2002 but did not become aware of the systemic nature of the problem until 2012.
Reached an agreement in principle to settle a class action lawsuit for $110 million, which will be set aside to remediate customer harm.
John Stumpf, the CEO who retired under pressure from the scandal in October, was criticized for failing to grasp the gravity of the sales abuses and their impact on the bank.
The board has since cut or clawed back more than $180 million in pay to senior leaders including Tolstedt and Stumpf. Tolstedt resigned in June and has already lost $19 million in compensation. In addition to the $41 million Stumpf has already given up, the board decided last week to "clawback" an additional $28 million of incentive compensation.
On Feb. 28, the bank acted to reduce compensation for eight current executives by $32 million in a move that included eliminating 2016 bonuses and halving 2014 performance payouts. For example: "Tolstedt and certain of her inner circle were insular and defensive and did not like to be challenged or hear negative information". It also found that he used his position to protect Tolstedt.
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.
The investigation said Tolstedt "hindered" investigations and kept from the board how many people were fired for sales violations.
Tolstedt, who declined to be interviewed for the board's investigation, rejected its conclusions in a statement from her attorney.
Stumpf was grilled by the U.S. Senate Banking committee on September 28, drawing criticism from the committee for "failing to answer many questions".
"When you violate your code of ethics at Wells Fargo, you don't have an opportunity to come back", said Sloan, 56.
"His reaction invariably was that a few bad employees were causing issues, but that the overwhelming majority of employees were behaving properly". It found that Stumpf's commitment to the Wells Fargo sales culture and its decentralized structure led him to "minimize problems", despite "growing indications that the situation was worsening".
Wells Fargo Capital Finance is part of the Wells Fargo Commercial Capital group, which combines Wells Fargo's asset-based lending businesses to create a streamlined approach for customers incorporating their company's assets into flexible financing solutions.
Those accounts were opened by branch employees and managers in customers' names to meet sales targets. We have also retained independent third parties to provide their advice and feedback to help us identify possibilities for additional improvements across the company.
In late 2015, key board members including lead independent director Stephen Sanger pushed Mr. Stumpf to remove Ms. Tolstedt from her role. He refused to believe the model was seriously impaired and was full of admiration for Tolstedt, with whom he had a long working relationship. The bank emerged largely unscathed from the 2008 financial crisis largely because it hadn't engaged in the sort of fraudulent and irresponsible practices that crippled other major institutions and almost collapsed the global economy.
The board said "the investigation identifies cultural, structural and leadership issues as root causes of improper sales practices". At the time, the bank said as many as 2 million accounts were affected, but has since said the number might be larger.
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