Wells Fargo Exec Who Oversaw Fake Accounts Received $125 Million Upon Recent Retirement, Praise from CEO; Senate Hearings Next Week

Sanctimonious Wells Fargo, which was a major perp in foreclosure abuses, has finally managed to go too far. Even normally complacent institutional investors are disturbed how Wells Fargo threw customers illegally under the bus to wring some incremental revenues out of them.

Adding fuel to the fire is the revelation by Fortune that the officer on whose watch this abuse took place, one Carrie Tolstedt who conveniently resigned at the end of July, identified by an alert NC reader the day the scandal broke, made off with a cool $125 million in addition to earlier cash and prizes. From the Fortune story:

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.

That stands in contrast with $185 million in fines paid to the CFPB, the Los Angles City Attorney, and the OCC, and does not include the multi-million amounts she also received in annual pay.

The Fortune article also states that:

Tolstedt was in charge of community banking during the entire time the “sandbagging” operation took place

Her success in cross selling was repeatedly cited in annual proxies as the reason for her ~ $9 million in yearly

When she resigned, “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.’ ”

Fortune stresses that the Wells’ post-crisis clawback policy would appear to give it the power to rescind some of Tolstedt’s pay, yet management appears to have no intention to do so. One has to wonder if that’s because if she really has retired, she’s already stashed away enough millions that she could afford to wage a court battle to argue that she was acting with the knowledge and authorization of top management and thus should not bear the full brunt of financial punishment. And it’s not hard to see that any serious pursuit of who knew what when would almost certainly implicate top level executives, and Stumpf in particular. From the Financial Times:

Dennis Kelleher, chief executive of Better Markets, which lobbies to hold banks more accountable, said: “If Wells was serious about putting their customers first the CEO would give back a substantial amount of his performance pay and publicly disclose in detail all the people in the corporate chain of command who are responsible for making sure this [kind of incident] did not happen.”

One sour note in Fortune article is the failure to question the bank’s claim that 5,300 employees who engaged in cross selling abuses were fired. That figure covers terminations over the period that the regulators and City Attorney investigated, from 2011 through 2015.

Wells was clearly all on board with the fake accounts scheme until the Los Angeles City Attorney opened an investigation due to a late December 2013 story in Los Angeles Times detailed the abuses. That means Wells was not in a legal hot seat until sometime in 2014. And even then, Wells no doubt believed, at least initially, that it could push back successfully. That means, since the “sandbagging” took place with the tacit and probably explicit backing of management, it’s highly unlikely that many employees were ousted for going too far prior to 2014, and possibly even 2015. In other words, a lot of the firings attributed to cross-selling abuses were probably for other failings.

The Financial Times discussed how the Wells scandal is escalating:

One large investor told the Financial Times that Wells should reclaim bonuses from the Wells executive, who has received at least $45m in total pay since 2011.

“There’s no point having a clawback if it doesn’t claw in circumstances like this,” the shareholder said. “What has happened at Wells is an affront to the integrity of the institution.”

Another investor said: “If this person presided over this, why no accountability? We have share-based pay so that it can be clawed back when people have been earning bonuses under false pretences, and if fraudulently opening client accounts isn’t false pretences, then I don’t know what is.”

Bernie Sanders, the US senator who ran unsuccessfully for president this year, also weighed in, calling the pay for Ms Tolstedt a “disgrace”.

Moody’s on Monday described the regulators’ disclosures as “highly disturbing”. The rating agency said the developments were a “credit negative” for the bank.

The bank has also suspended cross selling efforts for the balance of the week, with Wells claiming that it was diverting resources to answer presumably irate customer calls.

The Senate Banking Committee has hearings set for September 20.

As we said in our initial post, it’s disturbing that regulators failed to target individuals, particularly for such a crass, systematic, and large scale fraud, and to add insult to injury, demanded a paltry fine. They apparently fell for the excuse that the damage per customer was $25, mere chicken feed. But the cost to them in terms of hassle, and most of all, credit score damage, which is a serious black mark for job-seekers and anyone looking for a mortgage or other loan, means the monetary losses are a poor measure of actual harm. So I hope readers whose Senators are on the banking committee will e-mail or call them and tell them they need to ask the bank regulators why they are punishing bank shareholders rather than the real perps, the executives who tolerated or encouraged this fraud.

But it is also telling that this case has elicited so much interest because the victims were clean. Other types of bank fraud, which have typically resulted in far more damage to the victims, such as foreclosure abuses, payday loans, debt collection cons, have stirred proportionally less outrage….because the target was typically a borrower and could be depicted as complicit in his sorry state by the mere fact of taking a loan. In German, the word for debt, schuld, also is the word for sin. Americans similarly harbor a dim view of individual borrowers, even as it becomes almost impossible to attain a bourgeois adult life of getting a college degree, buying a house, and having a car without being in debt. So while we can hope that the Wells abuse will finally break the logjam and lead to punishment of senior executives, even then it’s more likely to be an isolated case than a start of a trend.

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75 comments

  1. Jerri-Lynn Scofield

    Set against Tolstedt’s total compensation, it’s even more apparent what a joke the financial penalty against Wells represents– especially b/c the regulators neither tried to bring any criminal charge against the firm and didn’t go after senior management or other responsible individuals. Let’s hope members of the Banking Committee take this issue seriously.

        1. readerOfTeaLeaves

          I received a very interesting, and scathing, fundraising appeal from her pointing out that the GOP is acting to gut the CFPB (?) because it was key in tracking down and enforcing the shenanigans that Wells pulled. The banks, acting through their elected intermediaries, want to gut the federal agency created in order to help harassed consumers.

          So, plenty of chirping going on.

    1. SBurns

      For sure the members of the Banking Committee WILL take this issue seriously! But they will just be seriously acting – as in actors who belong in Hollywood. Wells Fargo wrongfully foreclosed our home in 2010. The mortgage settlement payout was $7,400. We had over $300,000 in mostly our own sweat equity. Now we have nothing. Except bad credit. That was our only investment. We asked at least three different attorneys to help us negotiate with Wells Fargo and they all turned us down saying the same thing – Wells Fargo is too difficult to deal with!
      ” But the cost to them in terms of hassle, and most of all, credit score damage, which is a serious black mark for job-seekers and anyone looking for a mortgage or other loan, means the monetary losses are a poor measure of actual harm.”
      Fair and appropriate restitution is never a part of punishing the banksters.

      1. Yves Smith Post author

        What you miss is that the Senate Banking Committee has no direct authority over Wells. What they can do is embarrass regulators, perps, and prosecutors into doing more. And this sort of event also strengthens their hand in fighting efforts to roll back financial regulations.

        1. Veri

          And those who go before Congress…

          A. Embarrassment

          Or

          B. $100+ million paydays.

          They can afford a little embarrassment. Congress is a clown show joke.

        2. SBurns

          Can regulators, perps, and prosecutors experience the human emotion of embarrassment?

          P.S Yves, I am very thankful for you and the work you do at Naked Capitalism. It has been the best resource for teaching me about the world of finance and economics.

    2. shinola

      When she resigned, “John Stumpf said Tolstedt had been one of the bank’s most important leaders and ‘a standard-bearer of our culture’…

      Well, at least that part is true.

  2. tawal

    As a career community banker for a $50 billion bank, this makes me sick. We need to put these bad apples in jail, and ban them for life from the industry! How to start? Hey Warren, time to sell, and publicly say why?

    1. none

      Banning someone for life from the industry when they’re already retired and have $125mm in their pocket doesn’t seem like much of a deterrent. It’s gotta be jail or nothing.

    2. abynormal

      “if she really has retired, she’s already stashed away enough millions that she could afford to wage a court battle to argue that she was acting with the knowledge and authorization of top management

      Nothing strengthens authority so much as $ilence.~da Vinci

  3. crittermom

    Excellent article.
    I was familiar with the story already but had questioned the part about so many employees being terminated in relation to it. Something about that smelled fishy to me.

    Thanks for clearing that up, showing it is what I’d suspected. Numbers are thrown out there making it sound like the bank was ‘coming down hard’ for such practices, when in fact, as you clearly pointed out, the numbers are more smoke and mirrors to make it ‘sound good’ while those at the top are rewarded, with shareholders punished instead, as usual.

    Unfortunately, my current state does not have a senator on the banking committee. Otherwise, I would have written them before even commenting on here.

    I’m not surprised there is no talk of clawing back money from her.
    I remain disgusted by the fact Jamie Dimon received an $18.5 million bonus for his ‘work’ in negotiating such a small fine ($17 million, was it?) behind closed doors with Eric Holder for one of the many shenanigans by Chase Bank.

    This latest revelation needs to remain in the news until every citizen is angered by these abuses from the banks and finally unite to demand accountability. Learning of her salary for overseeing such abuses should be a good start to get folks infuriated if the story reaches enough people.

    You are correct in that those of us who lost our homes to the banksters are still looked down upon and blamed.
    This latest scam uncovered should get the attention of those who were not affected by the foreclosures, as well.

    The Epipen facts sure got folks upset. Hoping this story, again involving obscene CEO compensation for screwing people, will build upon that anger and unite the citizens to get more vocal and force a new trend.

        1. crittermom

          I was apparently way off on my figures (sorry!), but hey, what’s a few million or billion to those of us left with absolutely nothing but our continued anger?

          Note: It’s now 4:26 a.m. where I’m living. Just stepped outside to let my dog out, who’s recovering from a urinary tract infection. Heard bull elk bugling close by. They’re now in the rut (mating season).
          Thanks, Mother Nature. I truly needed that, as my normally very low blood pressure was once again rising from these latest disclosures regarding the banks.

    1. Stephen Haust

      Isn’t it possible that they were fired for NOT accomplishing enough cross sales?
      According to “the bank’s claim that 5,300 employees… were fired”, They are further
      identified as employees “who engaged in cross selling abuses”. (Fortune).
      But the L A Times points out that “Anyone falling short after two months would be fired”.
      So couldn’t it be that though they “engaged in…abuses”, they were fired because they
      didn’t engage in enough abuses, and that the bank is now claiming these firings as a
      corrective instead of the likelihood that they were actually punishment for not being
      dishonest enough?

      1. readerOfTeaLeaves

        Another excellent article, which IMVHO opinion (inadvertently) makes a great case for either:
        (1) community banking, or else
        (2) a post office bank, which wouldn’t require its employees to sell anything, or else
        (3) credit unions

        is this McClatchy article, including a video news report. It quotes people who had worked for banks that were taken over by Wells Fargo, and then got these crappy quotas. It’s not hard to see the culpability of those at the top of the bank’s food chain, who — by failing to claw back the $125,000,000 are complicit in fraud on their customers.

        It’s a great overview:
        http://www.mcclatchydc.com/news/nation-world/national/mcclatchys-america/article101334062.html

  4. Bottom Gun

    The regulators’ weakness not only fails to stop the problem, it actually perpetuates it.

    Imagine the US Army is trying to control two valleys in Afghanistan. In the west valley, there is a battalion that is out of shape, doesn’t speak the language, isn’t disciplined. The commander is an abominably poor leader and the soldiers know it, as they always do. The Taliban pays men to shoot at and booby-trap the Americans, but when, through blind luck, the Americans find an IED or catch a sniper they just fine the poor slob a few afghanis and send him on his way. Net of his Taliban pay he still winds up ahead.

    By contrast, into the east valley goes a battle-hardened battalion. The skipper is aggressive and loyal to his men, who would set charges on the gates of Hell itself if he asked. One of the platoon commanders is a Dari-speaking Muslim from Fremont, CA with cousins in the valley, and he has managed to teach everyone basic local phrases and customs. They move silently, keep spotless weapons, are well-mannered in the bazaars, and seem to have an uncanny knack for setting night ambushes in the right place. The Taliban snipers in the area, and their bosses, have a strangely consistent habit of winding up dead with a US Army unit flash in their mouths.

    Where are the Americans more likely to control the valley, and where are the Taliban going to run rampant? If you are an Afghan villager, where are you going to be more willing to cooperate with the Americans and trust them to protect you and your family?

    Osama bin Laden, as evil as he was, made a great point when he said “when people see a strong horse and a weak horse, they will naturally want to side with the strong horse.” The US government knows this. Hell, anyone with two neurons to rub together knows this. Do you think it’s really an accident that, again and again and again, the financial regulators — especially DOJ — end up as the weak horse?

    1. Synoia

      Imagine 100 valleys, 99 of the first incompetent leadership and one competent.

      The Competent leader will be reassigned, especially in Industry, because the others are made to look bad, and he must be cheating.

    2. Judd

      Exactly, this incident and the amount of personal compensation (bonanza!) that is being reported will make this type of thing more likely in the future. There are banksters everywhere wondering how they can do the same thing themselves and taking their ideas to the CEO and then wondering how they can do a better coverup or make themselves golden retirement parachutes.

      In fact, why would other banksters bother to do the right thing when doing this type of thing is so much more lucrative and results in masses of money and, who cares, the possible loss of a job (wink wink).

      This also shows the real danger (to all of us) of money in politics. How often do banksters cosy up to pols? Were there Wells banksters meeting with Hillary in California or giving fat checks to the RNC?

      Why would either party bother to go after their donor base when the story will die in a week and the source of money keeps flowing?

  5. griffen

    Great reporting on this, yet another reason to make frequent visits to the site.

    Folks should wonder aloud about an alternative. Hard to do without visiting a physical branch (I’ve no reason to use Ally Bank).

  6. milesc

    > “But it is also telling that this case has elicited so much interest because the victims were clean.”

    Too true.

  7. crittermom

    More:

    http://www.marketwatch.com/story/its-business-as-usual-at-wells-fargo-after-record-fine-2016-09-09
    This quote especially makes me gag: “Mosby sees little chance of criminal charges against bank employees, because the false sales were “not about generating revenue or an accounting scheme,” and that affected customers were made whole.”
    Sure. That $25 really made them whole again and none of it was about generating revenue.

    More still:
    http://www.marketwatch.com/story/thousands-of-complaints-suggest-account-issues-not-limited-to-wells-fargo-2016-09-12

    Maybe this offers a little hope, however?
    http://www.mccaskill.senate.gov/imo/media/doc/2016-09-12%20CFBP%20Wells%20Fargo%20Letter.pdf

  8. timotheus

    Debts = sins in English also as in the older version of the Lord’s Prayer, “forgive us our debts as we forgive our debtors.”

    1. Synoia

      Not KJ version of book of Common Prayer. The previous version was in Latin (Based on RC under Henry, Mary and Elizabeth I).

      1. Katharine

        The Book of Common Prayer originated with Cranmer and has evolved somewhat in different branches of the Anglican tree. It uses trespasses in the Lord’s Prayer. But the King James Bible (technically Authorized Version, or AV) says debts (which comes straight from its Latin equivalent). Many Protestant denominations went with that reading, which can be a hazard to visitors from other backgrounds, as “those who trespass against us” takes a lot longer to say than “debtors”. The Book of Common Prayer appears to have relied on the explanatory verse immediately after the prayer in the AV, which says trespasses; the Latin there is peccata.

        I actually find it rather curious that the original explanation interpreted debts as trespasses. Or almost original. I can’t follow the Greek, and in any case the earliest written text we have appeared decades after the tradition was established, so I expect there is a history there we’ll never know.

    1. Synoia

      Absolutely. And their termination was either insubordination or lack of performance, and WF has files full of paper to prove it.

      1. abynormal

        you Absolutely don’t think like a banker…

        “The number of deaths from 2008 through March 21, 2014 on which JPMorgan Chase collected death benefits; the total face amount of BOLI life insurance in force at JPMorgan; the total number of former and current employees of JPMorgan Chase who are insured under these policies; any peer studies showing the same data comparing JPMorgan Chase with Bank of America, Wells Fargo and Citigroup.”
        http://wallstreetonparade.com/2014/04/suspicious-deaths-of-bankers-are-now-classified-as-%E2%80%9Ctrade-secrets%E2%80%9D-by-federal-regulator/

        1. Katharine

          I have wondered for a long time how it can be legal for anyone to take out life insurance on someone without his knowledge or consent, and without any benefit to his heirs or designees. Does anyone here know how law on this varies among countries, or within this one?

          1. abynormal

            Lawd i wish i hadn’t hunted on this one…Katharine, this is HUGE and explains why earnings have held on so long. we are in Seriously Dangerous Times…

            “But absent meaningful regulation around the practice, it grew unchecked, and soon companies were taking out policies on many poorly paid employees like janitors, then reaping millions in profit when they died.

            A string of class-action lawsuits, some filed by Mr. Myers, went after companies abusing the practice. Several companies, including Walmart, settled the suits, paying millions to low-ranking employees who had been covered. The I.R.S. took companies including Winn-Dixie and Camelot Music to court for using policies as tax avoidance schemes.

            Critics began calling the policies “dead peasant” insurance, an allusion to Nikolai Gogol’s novel “Dead Souls,” in which a con man buys up dead serfs to use them as collateral in a business deal.

            Despite the criticism, companies and banks continued to use the policies to chase returns. In the years before the financial crisis,** life insurers for banks including Wachovia and Fifth Third Bancorp invested their premiums in a hedge fund run by Citigroup**.

            As the value of the fund rose, the profits were recorded on the companies’ balance sheets, raising earnings. But when the hedge fund collapsed during the market panic, so did the value of the policies, leading the banks to take substantial write-downs. (yeah right)

            Efforts have been made to better regulate the practice. The 2006 Pension Protection Act included a set of best practices for companies taking out life insurance on employees.

            “The government has taken great strides to clean it up,” said J. Todd Chambley, who runs the executive benefits practice at Aon Hewitt.

            Still, the notion of life insurance policies benefiting company balance sheets, rather than individuals, remains subject to criticism.

            Responding to attacks on the Freedom Communications plan, Mr. Kushner defended himself in a letter to employees. “Life insurance is not ghoulish, nor are the people who sell it, nor are those who buy it,” he wrote. “Life insurance, by its very nature, was created to benefit the people we love and care about most.” http://dealbook.nytimes.com/2014/06/22/an-employee-dies-and-the-company-collects-the-insurance/?_r=0

            …and i looked for recent ‘oversight’ but not finding it (i’ll keep at it…when my stomach settles)

  9. Quanka

    MSM ‘reporting’ on this topic sorely lacking. In other news, Sun still rose in the east today. Couldn’t agree more with the point about how this story is only getting traction because of the clean victims.

    For NC readers with friends and family, its important to explain to them the connection with the credit score. To me this is the nexus of the whole story — in normal circumstances fraudulently opening an account would be the story but here in ‘Merica we perfected that practice years ago.

  10. Cry Shop

    Reminds me of DuPont’s recently retired CEO who not only drove the company into the ground, but actually lead the cost cutting in maintenance which resulted in dozens of deaths.

    1. Mike G

      Take out life insurance on frontline employees without their knowledge.
      Slash maintenance budgets.
      More frontline employees die in accidents = profit

      Evil.

  11. Arizona Slim

    There’s a big Wells Fargo scandal in my mother’s neighborhood. What’s it all about? Well, it’s all about that abandoned house that WF owns and does nothing with. I mean, come on, Wells. Foreclose and put it up for auction, mmm-kay?

    Oh, yes, WF’s crack team of banksters has been notified that WF is in violation of township ordinances. Over such things as having weeds all over the back yard. (Those weeds would dwarf an NBA star.) And tarps that are hanging off the leaky rooftops. And a swimming pool that is improperly covered.

    I could go on and on, but you know what? I’ll leave that to Mom and the neighbors. Because they are up-SET.

  12. craazyman

    this looks like a triumph for feminism. People forget women can do this sort of thing as well as men, if they have the chance and find themselves in the right situation. What an opportunity this must have been!

    We’ll see what the facts turn out to be, but it looks bad right now.

    Maybe some sort of explanation will come forth that puts it all in context.

    Here’s the Top Ten possibilities . . .

    Number 10:
    Homeless people need credit just like anybody else

    Number 9:
    The more accounts you have open, the better chance you have at getting a free toaster oven! Is that bad?

    Number 8:
    Why is it so bad if the bank does your paperwork for you?.

    Number 7
    If you lose your ATM card, don’t worry! You’ve got 7 others.

    Number 6
    It was an innocent mistake: Staff didn’t realize Wells wanted them to offer pressure cookers to customers who opened accounts, not work in a pressure cooker company.

    Number 5
    Wells Fargo can find better uses for the money than customers can. Its more efficient at making money and that makes society better off. .

    Number 4
    What’s $25 among friends in a community. I mean really. Get over it.

    Number 3
    When so many people these days are named Muhammad and Jose and Bob, mistakes happen.

    Number 2
    If you don’t encourage people, they’ll never reach their financial potential

    and Reason Number 1 that will put this all in context . . .

    This will be the last time Wells hires that Nigerian marketing consulting firm, that’s for sure!

  13. flora

    Token fines without criminal penalties preserves the forms of law while “protecting” the Wells Fargo customers from “too much government.” Leaving the mega-banks free to rob is what keeps America free! Milton Friedman and the neolibs would be proud. /s

  14. Northeaster

    Nothing like a $2700.00 bribe campaign donation to Chuck “Wall Street” Schumer by Carrie won’t fix.

  15. allan

    Wells Fargo told staff to keep quiet about missing papers: lawsuit [Reuters]

    A former employee accused Wells Fargo & Co of instructing workers at a call center to refrain from telling customers about lost deeds or other missing documents, and of firing the worker who called the policy unethical, according to a lawsuit made public this week.

    Duke Tran, who was a customer service specialist at the bank, says that his supervisor berated him for telling a husband and wife that their loan contract was missing from an internal system.

    Tran and others later received an email instructing them not to tell customers about situations “where we have a lost contract, deed, any type of document, really, but especially when it relates to securing a property,” according to a copy of the email filed with the lawsuit. …

    From May. A few rogue employees, no doubt.

    1. rich

      There are multiple layers to Wells Fargo’s management crime.

      The first is incentives distort behavior. Add management imposed hard targets that prioritize bank profits over customer needs and bad behavior goes exponential. Management learned long ago that 30% of executives cheated by backdating stock options. They didn’t need to lie, cheat or steal to keep their job like many Wells Fargo employees.

      Bad management is perpetually surprised when their simplistic methods of motivation, bribing people or firing them, backfire on a widespread basis as people respond to the poor system management created.

      Like the co-worker with body odor bad management never recognizes their offense.

      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.”

      She is a standard-bearer for greed and driving in fear.

      She is a champion for executives who blame the little people for trying to survive in a situation where the employee is damned no matter what.

      She is a champion for sticking her executive head in the sand for years while her division assaulted customers financially.

      Her retirement pay reflects the bizarre lack of balance and absence of accountability executives get from each other and their corporate board of directors.

      Management in our world today is absurd, i.e wildly unreasonable, illogical, or inappropriate. Carrie Tolsedt is the latest poster child in that regard. Unfortunately, the system is chock full of absurd corporate executives. It’s the water in which they swim.

      http://peureport.blogspot.com/2016/09/wells-fargo-exec-over-fraudulent.html

      PEU sums it up.

      March on toward the bottom of the ethics barrel! The prize is there.

  16. Sluggeaux

    I don’t doubt that the “fired” employees being counted by Wells were actually terminated for failing to meet their boiler-room “sandbagging” goals. The earlier quotes from employees about pressure from management on them to sell bundled services suggests that many were being terminated for failing to adequately screw customers during the run-up long before the L.A. City Attorney got involved. I also strongly agree with the notion that Tolstedt’s final compensation is “hush money” in order to protect the C Suite.

    Congress will likely act — probably to preempt pesky local prosecutors from enforcing local banking laws, just like they preempted state enforcement against “national” banks in the run-up to the mortgage crisis (abetted by Ruth Bader Ginsburg in the outrageous Watters vs. Wachovia Bank US Supreme Court case). The Feds would never have even been shamed into giving Wells this wrist-slap if not for the local yokels getting involved.

  17. flora

    The 1980’s Savings and Loan frauds were cleaned up, CEOs went to jail and accommodating legislators were punished (Keating Five) – under a Republican presidency. In the early 2000’s, Enron and Worldcom
    CEOs went to jail for fraud and Arthur Anderson Accounting was found guilty of criminal charges related to its Enron auditing – under a Republican presidency.
    Clinton deregulated the banks. Obama has said he’s standing between the banks and the pitchforks.
    I’m starting to think the only way to hold the mega-banks and their CEOs criminally liable is to elect another Republican president. (sad comment on the Dem party.)

    1. flora

      adding: Short of fully enforcing regulations, I wonder how much of this could be stopped by eliminating (via tax code) stock options for CEO pay.

      1. inode_buddha

        IMHO this is an *excellent* idea, I would love to see it spread. Adding to that, I’ve been saying for *years* that capital gains should be harmonized with labor income — permenantly. We could do this in exchange for eliminating corporate taxation altogether — thereby removing that whine from the right.

    2. Mike G

      More a commentary on how thoroughly corporatism has infested both parties, and how gutted the regulatory agencies have become in the last couple of decades, with a major ideological push in that direction during the crony-capitalist GW Bush years.

  18. PQS

    Once again, is there another industry besides finance where ripping off the customer is not only rewarded, but rewarded so handsomely it pales in comparison to whatever fines the so-called regulators might impose for bad behavior?
    Oh, that’s right. The Mob has a similar structure. Except at least occasionally a mobster goes to prison.

  19. Robert Hahl

    “One sour note in the Fortune article is the failure to question the bank’s claim that 5,300 employees who engaged in cross selling abuses were fired. That figure covers terminations over the period that the regulators and City Attorney investigated, from 2011 through 2015.”

    I happen to know one of those people, a broker. About three years ago he “decided to leave” Wells Fargo because they wanted him to push loans on his customers. He said his goal was keep customers from needing loans, and so there was no future for him there.

    I think those 5,300 people we fired for not cross-selling hard enough.

  20. Beans

    This cross selling scam has gone on for years. I have a friend who worked for WF over 5 years ago who was beset with the unethical behavior that was demanded of him to keep his job. He worked in a low income predominately Spanish speaking community. As an employee who opened accounts for non-English speakers who were mainly looking for a way to cash their checks without having to pay a big fee to do so, he was required to also ‘advise’ them of other banking services. Of course all of these other banking services had a $5 or so monthly fee attached to them – like on line bill pay and the like. None of these new banking customers requested the services, but were signed up and billed, nonetheless, which would often result in overdraft charges within a few months. Overdraft charges were yet another way for WF to profit off poor people who didn’t request or need costly services that they did not opt out of at the time of opening their account.
    He hated his job and eventually got ‘fired’ as a result.

  21. JEHR

    As NC readers know, Goldman Sachs created a deal called Abacus which the SEC called fraud. Goldman Sachs was never brought to trial on that accusation as it was TBTF. Peel forward to 2015 and a small bank called Abacus is accused of mortgage fraud and goes to trial but is found not guilty because there was no intent to defraud but quite the opposite. An independent film was made of this injustice and shown at TIFF (Toronto International Film Festival) and the film is called, “Abacus: Small Enough to Jail.”

    What a world we live in!

    1. mk

      thanks for posting, from the paper you linked to:
      Who Are the Bank Workers?
      Roughly 1.7 million men and women work in retail banking, nearly half of whom are either bank tellers or customer service workers. They are overwhelmingly women (84.3 percent), and nearly one in three makes less than $15 an hour. Bank tellers, the single largest occupation within this category, have a median hourly wage of $12.44. These wages have been stagnant for decades; the value of a teller’s wages has been dropping since the 1970s. With wages this low, it is little surprise that so many workers must fall back onto publicly funded safety net programs to support themselves and their families. In 2014, researchers at the University of California, Berkeley, found that nearly one-third of tellers’ families were enrolled in one or more such programs (the Earned Income Tax Credit, Medicaid and/or CHIP healthcare programs, Supplemental Nutrition/Food Stamps, and TANF) at a public cost to taxpayers of nearly $900 million per year. Thus it is also understandable that these workers would become concerned about and dependent on commission – based incentive pay offered on top of these wages for selling various banking products to customers.

  22. Chauncey Gardiner

    Another government civil settlement with a “Too Big To Fail” banking institution when another episode of systemic customer abuse and perhaps fraud has occurred, and a senior bank executive who headed the unit was reportedly given a $125 million payment and praised by the CEO as “a standard bearer” for the bank as she walked out the door. Beyond disgusting.

    Wonder how far up the bank’s chain of command knowledge of this behavior went, and whether Sarbanes-Oxley applies? Would be interesting to hear public testimony by at least a few of those thousands of employees who the bank said have been fired related to this matter.

    Noteworthy that according to the cited report of this episode in Fortune: …”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.”

  23. cnchal

    Fortune stresses that the Wells’ post-crisis clawback policy would appear to give it the power to rescind some of Tolstedt’s pay, yet management appears to have no intention to do so. One has to wonder if that’s because if she really has retired . . .

    I don’t wonder. Upper management are the banksters, and if they claw Tolstedt’s theft back, their own theft might be clawed back. They are circling the wagons.

    Also not surprising is that one of the biggest pustules of greed is a one tenth owner of this criminal enterprise. That’s likely where the push for this comes from, except they call it efficiency. Greed pustule tells management his profits are not enough so find more any way you can.

  24. Anon

    I’m sure those 5300 employees thought up this grifting scheme all by themselves. (Individually and without consultation.)

    It seems WF is using the firings as a PR move to show the ‘public’ that regulation has consequences. (For the little guy.) Maybe this is the best reason why the folks at the top should go (to jail).

  25. Judd

    Is it possible for the government and affected customers (everyone since all Wells customers are now left wondering what else has been happening and needs to spend time and effort checking and rechecking) to sue her directly?

    Doesn’t this mean she was the head of something illegal since the media is reporting this as illegal? This is insane. No wonder people hate banksters.

  26. KnotRP

    In other words, a lot of the firings attributed to cross-selling abuses were probably for….not meeting your quota!

  27. allan

    Wells Fargo seeks to shore up reputation in wake of scandal [Reuters]

    … Wells Fargo – which was long the envy of the banking industry for its ability to sell multiple products to the same customer – agreed to pay $185 million in fines and $5 million to customers last week after reaching a settlement with three regulators over the alleged sales abuses.

    The phantom accounts meant that some customers were charged for insufficient funds, according to the regulators.

    During a CNBC appearance on Tuesday evening, Chief Executive John Stumpf apologized and said management takes responsibility for the problems identified in the settlement. Although the bank has eliminated sales goals for retail staff, Stumpf said “cross-selling” products from various businesses to customers is still important to growing its business.

    “We still love-cross selling,” he said, later adding, “Cross-sell is shorthand for deep, long-term relationships identity theft and wire fraud. We love that.”


    Together we’ll go far (into your wallet).

  28. kimsarah

    As one previous commenter suggested, how about naming the Wells Fargo executive team.

    Executive officers
    David M. Carroll, Senior EVP, Wealth and Investment Management
    Hope A. Hardison, Senior EVP, Chief Administrative Officer
    Richard D. Levy, EVP, Controller
    Michael J. Loughlin, Senior EVP, Chief Risk Officer
    Avid Modjtabai, Senior EVP, Consumer Lending and Operations
    John R. Shrewsberry, Senior EVP, Chief Financial Officer
    Timothy J. Sloan, President and Chief Operating Officer
    James M. Strother, Senior EVP, General Counsel
    John G. Stumpf, Chairman and Chief Executive Officer

    Board of directors
    John D. Baker II, Executive Chairman, FRP Holdings, Inc.
    Elaine L. Chao, Former U.S. Secretary of Labor
    John S. Chen, Executive Chairman and CEO, BlackBerry Limited
    Lloyd H. Dean, President and CEO, Dignity Health
    Elizabeth A. Duke, Former member of the Federal Reserve Board of Governors
    Susan E. Engel, Retired CEO, Portero, Inc.
    Enrique Hernandez, Jr., Chairman, President and CEO, Inter-Con Security Systems, Inc.
    Donald M. James, Retired Chairman, Vulcan Materials Company
    Cynthia H. Milligan, Dean Emeritus, College of Business Administration, University of Nebraska – Lincoln
    Federico F. Peña, Senior Advisor, Vestar Capital Partners, Former U.S. Secretary of Energy and Former U.S. Secretary of Transportation
    James H. Quigley, CEO Emeritus and Retired Partner at Deloitte
    Stephen W. Sanger, Retired Chairman, General Mills, Inc.
    John G. Stumpf, Chairman and CEO, Wells Fargo & Company
    Susan G. Swenson, Chair and CEO, Novatel Wireless, Inc.
    Suzanne M. Vautrinot, President, Kilovolt Consulting, Inc. and Major General and Commander, United States Air Force (retired)

    Code of Ethics
    Wells Fargo’s reputation as one of the world’s great companies for integrity and principled performance depends on our doing the right thing, in the right way, and complying with the laws, rules and regulations that govern our business. We earn trust by behaving ethically and holding all team members and directors accountable for the decisions we make and the actions we take. The Code of Ethics and Business Conduct (PDF) serves to guide the actions and decisions of our team members, including executive officers, and directors consistent with our company vision and values.

    Vision and Values
    We believe in our vision and values just as strongly today as we did the first time we put them on paper more than 20 years ago. Staying true to them will guide us toward continued growth and success for decades to come.

  29. Sprode

    Tolsted got the full fawning treatment from American Banker in 2013, including this gem (which looks less shiny with hindsight) :
    “And in what might be an even better gauge of [customer] opinion, they are giving Wells more of their business. The company’s cross-sell ratio of 6.1 products per household as of February is up from 5.98 a year earlier.”

  30. Jim

    You can go to jail if you are caught with marijuana and have a criminal record for inflicting harm on yourself. But if your a banker involved with fraud affecting thousands, you do not have to admit wrongdoing and don’t have any criminal record. Now that is justice!

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