Wells Fargo Investigating Leadership’s Role In Account Scandal
Wells Fargo & Co. (NYSE:WFC) is continuing to investigate the circumstances surrounding the recent account scandal that rocked all levels of the company. A generation of executives thrived in the ambitious sales culture promoted by the bank in recent years, winning promotions and being held up as examples of what colleagues could aspire to. At the same time, the people under them were opening thousands of unauthorized accounts for customers. The Southern California region was described by colleagues and in congressional testimony as a focal point of the rampant misconduct.
In 2009, Wells Fargo & Co. executive John Sotoodeh handed off more than a hundred branches in Southern California to his successor, Kim Young. Problems surfaced quickly, with rumors that some employees were opening bogus accounts swirling through the company. After warning that she wouldn’t tolerate misconduct during an introductory meeting with staff, sales crumbled across the regions Young oversaw. Sotoodeh is now one of three regional chiefs running the firm’s nationwide consumer-banking empire. Young retired in 2014.
No one said they heard senior executives instruct the employees to open bogus accounts during the numerous interviews conducted regarding the matter. However, some said that low-level managers privately coached employees to do so. Many executives simply ignored the ample signs that misconduct was flourishing below them. According to a person with knowledge of an internal investigation, company executives have already identified a number of current managers to be fired for their conduct. The person declined to identify those who may be about to lose their jobs.
The scandal finally reached critical mass in September. That month, the bank announced that it would pay $185 million in fines related to the matter and that chairman and chief executive officer John Stumpf would step down, along with Carrie Tolstedt, who oversaw the consumer unit. In its statement, Wells Fargo said, “The company’s leadership is intently focused on restoring trust in its community bank, making things right with customers and taking actions intended to ensure sales-practices issues do not happen again.”
The investigation will be massive. The bank’s three U.S. regional chiefs oversee more than 50 regional presidents, who oversee about 120 area presidents that each monitor their own cluster of branches. The bank has terminated only one area president so far for improper sales, while firing more than 5,000 lower-level workers as of September. Stumpf’s successor, Tim Sloan said in a speech to staff on Oct. 25, “We failed to acknowledge the role leadership played and, as a result, many felt we blamed our team members.”
Wells Fargo said in a statement that its leaders are closely examining the abuses and reports of retaliation against those who voiced concerns about the practices. The bank has policies prohibiting retaliation for reporting suspected misconduct. Wells Fargo said, “As we have disclosed, there are multiple investigations under way to address sales-practice issues, including by an independent committee of the board of directors.” The company also mentioned that the Securities and Exchange Commission is among the authorities examining its sales practices.