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Fortune: Wells Fargo Exec Who Headed Phony Accounts Unit Collected $125 Million

Fortune: Wells Fargo Exec Who Headed Phony Accounts Unit Collected $125 Million

(Getty Images/Joe Raedle)

By    |   Tuesday, 13 September 2016 09:34 AM

 


A former Wells Fargo & Co. CEO may walk away into retirement with a huge payday while the banking giant is struggles to reassure regulators, lawmakers and customers after employees opened accounts without clients’ approval under her watch.

Fortune.com reported “it does not appear” that Wells Fargo is requiring Carrie Tolstedt, the Wells Fargo executive who was in charge of the unit where employees opened more than 2 million largely unauthorized customer accounts to give back any of her estimated $124.6 million pay.

In the July announcement of her exit, which made no mention of the soon-to-be-settled case, Wells Fargo’s CEO John Stumpf said Tolstedt had been one of the bank’s most important leaders and “a standard-bearer of our culture” and “a champion for our customers.”

The Consumer Financial Protection Bureau (CFPB) and two other regulators last week fined the bank $185 million over abusive sales practices.

The bank paid another $5 million to customers for creating more than two million fake accounts for products like credit and debit cards to meet aggressive sales targets.

Wells Fargo, the largest U.S. bank by market capitalization, said on Tuesday it would eliminate all product sales goals in retail banking, starting next year.

The fines “probably should lead to a pay claw-back” from Tolstedt, the Wells Fargo executive who ran community banking until the company announced her retirement in July, Mike Mayo, an analyst at CLSA Ltd., wrote in a note to clients Monday.

“These issues should have been caught sooner and dealt with more forcefully,” he wrote.
 

The Senate Banking Committee plans to hold a hearing Sept. 20 on San Francisco-based Wells Fargo, following last week’s enforcement case in which regulators accused bank employees of opening deposit and credit-card accounts without approval to meet sales goals. Stumpf is among executives who’ve been asked to appear, a spokeswoman for the committee said Monday.

The allegations have been a black eye for San Francisco-based Wells Fargo, the biggest U.S. home lender and a marquee investment for billionaire Warren Buffett, whose Berkshire Hathaway Inc. is the bank’s largest shareholder.

Tolstedt, however, is walking away from Wells Fargo with a very full bank account—and praise. In the July announcement of her exit, which made no mention of the soon-to-be-settled case, Wells Fargo’s CEO John Stumpf said Tolstedt had been one of the bank’s most important leaders and “a standard-bearer of our culture” and “a champion for our customers.”

Richard Cordray, the head of the CFPB, had a different take, “It is quite clear that [the actions of Tolstedt’s unit] are unfair and abusive practices under federal law,” said Cordray. “They are a violation of trust and an abuse of trust.”

A spokesperson for Wells Fargo said that the timing of Tolstedt’s exit was the result of a “personal decision to retire after 27 years” with the bank. The spokesperson declined to comment on whether the bank was considering clawing back Tolstedt’s back pay.

"When Tolstedt leaves Wells Fargo later this year, on top of the $1.7 million in salary she has received over the past few years, she will be walking away with $124.6 million in stock, options, and restricted Wells Fargo shares. Some of that hasn’t vested yet. But Tolstedt gets to keep all of it because she technically retired. Had she been fired, Tolstedt would have had to forfeit at least $45 million of that exit payday, and possibly more," Fortune reported.

"Wells Fargo’s proxy statement says that the bank has “strong recoupment and clawback policies,” and that the bank will revoke bonus pay if it is found that the conduct of an executive resulted in representational harm to the bank, or that the executive was not able to “identify or manage” risks in his or her division. But there is no sign that Wells Fargo is going to ask Tolstedt to return even a sliver of her stock jackpot," Fortune reported.

“This appears to be exactly the situation that clawback provisions were created for,”  Dennis Kelleher, president of Better Markets, a group that lobbies for more regulation of the big banks, told Fortune. “If they don’t apply here, when will they apply?”

Meanwhile, the bank said Tuesday it has eliminated product sales goals for its consumer bankers.

“We want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers,” Chief Executive Officer John Stumpf said Tuesday in a statement.


Stumpf, 62, was asked to testify in Washington on the bank’s alleged misconduct after it agreed to pay $185 million in fines over claims that it opened more than 2 million unauthorized accounts. The elimination of the sales goals, effective Jan. 1, follows instructions from the lender to U.S. call center workers to temporarily halt cross-selling of financial products.

Revelations that bank employees had opened the accounts are “highly disturbing” and

(Bloomberg, Reuters and other Newsmax wire services contributed to this report).

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A former Wells Fargo & Co. CEO may walk away into retirement with a huge payday while the banking giant is struggles to reassure regulators, lawmakers and customers after employees opened accounts without clients’ approval under her watch.
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Tuesday, 13 September 2016 09:34 AM
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