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. The 113-page report, prepared by the law firm Shearman & Sterling, relates how Stumpf nurtured and protected Tolstedt even as evidence mounted that her division’s behavior posed an enormous risk to the company.
The report comes about two weeks before the bank’s annual shareholder meeting on April 25, when all directors 15 directors will be up for re-election.
The scandal erupted in September when regulators slapped the bank with a $185 million fine over aggressive sales policies that led some employees to open accounts without customers’ permission. 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.
Wells Fargo admitted last year, for example, that it had fired 5,300 employees over five years for opening accounts for customers they didn’t want or know about.
Wells Fargo said its internal investigation determined fraudulent accounts practices dated back to 2002, reached a critical mass in the second quarter of 2007 and reached a peak in the fourth quarter of 2013, which coincided with media reports of the sales practices in the Los Angeles area.
In last year’s House testimony, Stumpf said, “I am fully accountable for all unethical sales practices in our retail banking business and I’m fully committed to fixing this issue, strengthening our culture, and taking the necessary steps and actions to restore our customers’ trust”.
In January, the board took the unusual action of publicly firing four executives whom the board said had major roles in the bank’s sales practices at the center of the scandal. A board-commissioned report obtained by CNBC details the various factors that led to the scandal.
And yet, it’s telling that WFC’s stock price hardly moved on Monday.
“I am very proud of what our team has accomplished.in terms of progress that has been made”, Sloan said in conference call with reporters.
Williams & Connolly lawyer Enu Mainigi said that they strongly disagree with the report.
In addition to Stumpf, community bank chief Carrie Tolstedt also has come under fire. Tolstedt, who declined to be interviewed for the investigation, rejected its conclusions in a statement from her attorney.
Together with an earlier round of punishments, Wells Fargo has clawed back a total of US$69 million from Mr Stumpf and US$67 million from Ms Tolstedt. It also found that he used his position to protect Tolstedt.
The report singles out Tolstedt for allegedly having been “insular and defensive” and having “effectively challenged and resisted scrutiny from within and outside” her community banking division. And he said he wished they could have gone back in time and end product sales goals and do more so that this damage wouldn’t have happened.
The report paints the bank’s board, meanwhile, as being out of the loop on the scope of the sales problems. Additionally, former Community Bank unit chief Carrie Tolstedt will be retroactively fired and must surrender an additional $47.3 million in pay.
Stumpf was grilled by the U.S. Senate Banking committee on September 28, drawing criticism from the committee for “failing to answer many questions”.
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”. Under Stumpf, Wells operated in a decentralized fashion, with executives of each of the businesses running their divisions nearly like separate companies.
Wells Fargo has rehired about 1,000 former employees who left or were fired during the bank’s fake-accounts scandal.
Shareholder advisory groups Institutional Shareholders Services and Glass Lewis have recommended the ousting of several board members.
The bank’s board called that recommendation “extreme and unprecedented”. Federal prosecutors are considering criminal or civil charges against the company, the Labor Department is investigating whether it illegally fired employees who reported the wrongdoing, and several cities and states, including California, have stopped doing business with the bank for now.
Information for this article was contributed by Ken Sweet of The Associated Press, James Rufus Koren of the Los Angeles Times and Laura J. Keller of Bloomberg News.