Wells Fargo Claws Back Additional $72 Million From John Stumpf, Former Retail Banking Head

Tyler Durden's picture

It's been a bad start to the week for bank CEOs and ex-CEOs.

Hours after Barclays chief executive Jes Staley was slammed with a regulatory probe and learned he would see substantial cuts to his compensation after he tried to "unmask" a whistleblower, the board of Wells Fargo said it has clawed back an additional $72 million of pay from the two former execs it holds responsible for last year's biggest banking scandal, namely the bank's unprecedented cross-selling practices which went on for years, and which, too, resulted in numerous whistleblowers being silenced.

According to a 113-page board committee report released on Monday, directors of the bank decided to hold back more pay than disclosed last year from ex-CEO John Stumpf and former retail bank leader Carrie Tolstedt, who departed the bank shortly before the scandal brke out. Among the reasons, as summarized by the WSJ, "the board felt misled about the extent of sales abuses that went back to 2002 and resulted in a $185 million fine and two congressional inquiries."

In its report, the board said as of last Friday, it decided to claw back from Mr. Stumpf an additional $28 million of incentive compensation paid in March 2016 under an equity grant made in 2013. In September it announced $41 million in clawbacks from Mr. Stumpf.

The board is also clawing back Ms. Tolstedt’s outstanding stock options worth about $47.3 million, following $19 million in earlier clawback activity. That brings total clawbacks to $183 million, according to the board report. That is one of the largest company clawbacks in recent history.

The report described Ms. Tolstedt’s work on tackling sales practices problems—including allegations of fake accounts being opened for unsuspecting customers—as “insufficient.” She and some of her top managers ran the division as “insular and defensive,” not liking “to be challenged or hear negative information.”

The Wells board alleged that it didn’t know that 5,300 employees had been fired over five years related to sales practices at the bank until federal regulators and a city official announced the penalty last September. The board’s results cap a six-month independent investigation that has not only rocked the country’s third largest bank by assets but also the broader banking industry, with dozens of firms examining their own sales practices at the behest of regulators.

The scandal fallout is far from contained however as many directors on the San Francisco bank’s board now face their own scrutiny. Last week, proxy advisory firm Institutional Shareholder Services Inc. suggested Wells Fargo investors vote against 12 of the bank’s 15 directors at the firm’s annual meeting April 25. The bank also continues to face federal and state investigations about its sales practices.

Some further details from the report, per the WSJ:

  • At one board meeting in October 2015, Ms. Tolstedt gave a presentation that directors later felt “minimized and understated problems” at her unit. At a May 2015 meeting, she told some board members 230 people had been terminated over sales-practice issues, a number far short of the aggregate total.
  • As early as 2012, some top Wells Fargo retail banking and risk executives knew the firm had a problem with its strategy of “cross selling” multiple products to the same customer. The issue grew with a Los Angeles Times story on the topic and a 2015 lawsuit by the Los Angeles City Attorney.

The bank’s board wrestled with how widespread the problem was. “Stumpf was by nature an optimistic executive who refused to believe that the sales model was seriously impaired,” according to the report. “He was too late and too slow to call for inspection of or critical challenge to the basic business model.”

Ah yes, the "too optimistic" excuse.

* * *

While Stumpf has been thrown under the bus again, his successor as CEO, Timothy Sloan, has been largely clearly of any wrongdoing: he was among eight other executives who didn’t receive 2016 cash bonuses, and who received certain equity clawbacks. He hasn’t had other pay clawed back, in part because he wasn’t closely involved in overseeing the retail unit until recently.

Both Stumpf and Sloan participated in the board’s investigation, a person familiar with the process said. Ms. Tolstedt didn’t participate on advice of her lawyer, according to the report.

The bank’s directors also faulted the lender’s decentralized organization and the autonomy it gave business heads who were encouraged to “run the business like they own it.” Functions including risk and human resources reported into the unit heads without enough companywide attention, the report added.

While Sloan is safe, Tolstedt was repeatedly singled out: the executive, whose rise once paralleled Wells Fargo’s own success, was singled out 142 times in the report. At one point, it said she was “scared to death” of taking a step that could hurt her unit’s sales figures. At another, it said there was “no evidence that Tolstedt showed serious concern about the effects of improper sales practices on Wells Fargo’s customers.” It explained the $47 million clawback by saying “that cause existed for terminating Tolstedt’s employment.”

In late 2015, key board members including lead independent director Stephen Sanger pushed Mr. Stumpf to remove Ms. Tolstedt from her role. But Mr. Stumpf declined, saying that Ms. Tolstedt, while at times controlling, was “the best banker in America.”

 

Ms. Tolstedt stayed for another six months before being moved out of her role. The board “should have been more forceful in pushing Stumpf to change leadership,” the committee concluded.

 

The report, which was approved by all the board’s independent directors, didn’t call for any other top-level clawbacks or terminations. In February, the bank announced the firing of four retail banking executives related to the scandal.

As reported previously, umproper sales practices began to escalate as far back as 2002, years earlier than the bank has agreed to check for consumer harm, the report noted. The bank has said it is going back an additional two years beyond what regulators called for in last year’s consent orders. By 2004, a Wells Fargo’s internal investigations employee wrote to management in the group about sales issues, but the board report found “no evidence” that the memo or its recommendations “were further escalated.”

In the end, Stumpf's "optimism" turns out to have been unjustified.

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cherry picker's picture

Close Wells Fargo

There are plenty of regional banks and credit unions which would like the business.  Goes for Goldman Sachs and the others too.

Maybe a bank will start up that can keep the government and others out of my account, you know, the way the bank is supposed to be.

booboo's picture

Sounds like they are getting the public prepped for another bailout with all this "look st us, we are spanking the bankers" news as of late.

FatTony7915726's picture

Not enough, how about jail time.

knotjammin2's picture

"sales-practice problems"!!!  More like felony fraud.  Nobody ever goes to jail!!

spastic_colon's picture

yes....this behavior has been going on for 30 years; these practices are not new.

hangemhigh77's picture

What about prison? PRISON? If any average Joe did what this guy did they'd be ramming a broomstick up his ass in some Hell hole prison everyday for the rest of his life. Why aren't these cocksuckers going to prison. Some teenager smokes a joint and he goes to prison for 20 years where everyday six 280 pound guys are shoving ten inch bones down his throat. But the banksters are exempt When the sheeple wake up I've got plenty of rope.

DisorderlyConduct's picture

What about complete divestiture and prison?

I mean think about it; they clawed back some $180,000,000 from them - AND THEY STILL HAVE MILLIONS.

If that doesn't piss you off, nothing will.

wmbz's picture

They say they did. I doubt they did. Just because it is in some report... means nothing.

Grandad Grumps's picture

Both my son and daughter had accounts at BMO (a holdover from when it was Harris) and BMO set up a credit line for rack of them without their knowledge and approval. Then they started charging them a monthly fee for the line. It was a big pain for them to get the credit lines cancelled and have the charges reversed.

I have come to the conclusion that all large banks are criminal organizations.

FatTony7915726's picture

BMO has a new CEO and he is bonus hungry.  Expect more of this shit happening!

pliny the longer's picture

they ARE criminal organizations;  was recently inside my bank, never a good place to be; the attractive and personable lady shared with me they are capitalizing on the WF angst and offered a new account, it is a 'black' account, a place to park operating cash that offers more security than a rank and file checking account (which by the way are so incredibly easily compromised its ridiculous, crime in this area is growing); so she had some good points to make, the account was 'free' and no downside;  funds could be moved between accounts as needed by the business.  

so far so good.  and she was attractive, another red flag.  i bit, i'm weak and admit it.  the account was not free.  in fact, its been a giant clusterscew and even the bank has no idea what account is which.  sheesh.  and there is a monthly fee, of course.  

ALL BANKS SUCK, the front line people are incompetent wal mart grade dumbasses and everyone above them is a fraud.  other than that, backbone of 'murka!!!!  

Coldfire's picture

BMO is the Montreal Mafia. Your children got off lightly. Wouldn't touch BMO with a barge pole.

GotAFriendInBen's picture

Should be good for 72 million in litigation costs

Fahq Yuhaad's picture

"Claw back" - do they ask him politely to write a check?

spanish inquisition's picture

Things must be hurting for Wells Fargo to have to claw back executive pay....

gregga777's picture

After the SHTF and America collapses economically and financially the American People's liesure time will be filled by hanging and/or burning the banking gangsters along with their bought and paid for political parasite scumbag protectors.  

hangemhigh77's picture

Don't forget all the useless donut eating imbecile cops that will put ten ex-Walmart employee idiot cops on a case to bust a 16 year old who smoked a joint and at the same time the cops in NY are opening the limo doors for Jamie Dimon who paid them 2 million to disperse the "Occupy Wall Street" protesters who were later corrupted by George Soros. The problem? Who has the ability to create money? It all goes back to the Federal Reserve. Burn that place to the ground and hang everyone in it.

I am Jobe's picture

Take that money and send it to the folks who were fired. After that get the Stumf Family to give up eveything and live a humble life and he can work at MCdonalds

hangemhigh77's picture

Fuck that throw his piece of shit corrupt ass in prison and let him rot.

Herdee's picture

I smell a lot of pressure from Warren Buffet.

gregga777's picture

Clawing out Stump's and Tolstedt's eyes would be a more appropriate punishment.  Afterwards, tattoo BANKING GANGSTER across their foreheads.  Let them try enjoying their $ hundreds of millions in loot totally blind and hated.  

small axe's picture

Since 2008 bankers have learned their lesson ten times over: don't get caught (not don't do it)

Vuke's picture

Ohmigod !  How will they buy groceries?  Food stamps?  I pity them.

Offthebeach's picture

Imagine showing up at Nantucket this summer, not in your own jet?  The.....horror 

Icewater Enema's picture

"She and some of her top managers ran the division as “insular and defensive,” not liking “to be challenged or hear negative information.”

And how is this different from people at the top of most organizations? Glad someone in the WF board has some balls for a change and took back the comp. 

aliens is here's picture

Big deal two crooks still millions left.

CHoward's picture

Fuck claw backing their money - go for the entrails or at a minimum the eyes!

ClowardPiven2016's picture

As long as I keep getting the whopping .07% on my Wells Fargo savings account I couldn't care less

silverer's picture

The headline I'd LIKE to see:

"Wells Fargo Claws Back Additional $72 Million To Refund To Consumers"

Keep dreaming.

insanelysane's picture

Completely missing the best part of the fraud.  When Wells Fargo opened the phony accounts they included in the fine print that the person being ripped off could not join a class action suit against the bank.  And best of all, the judges in California upheld that the fine print in the phony accounts was legally binding even though the owner of the phony account was never aware of the account or the fine print.  Bend over America.

Solio's picture

Flay, roll in salt, then pickle whole, comes to mind.

They took my home. Lost a lot of personal items when it went. I, commercial RE broker, could not force a deal to close, the buyer wanted more time for his due diligence. My payments were years ahead of schedule as I paid the principle. Wells Fargo waited until shortly before my own closing date on the deal I had been working on.  They said everything was fine, and then, I got my notice. Goodby home.

 Of course, WF made million$$ when they foreclosed on my property, due to their position with the use of derivatives.

I could have paid it off in full.

piloto caliente's picture

Uncle Warren's favorite bank.  The "cross selling" crap was going on long before 2002, which it seems was as far back as the board chose to look.  I experienced it personally for four years in the early 90s.

Soph's picture

Interesting. It's a shame CEO's for banks in Canada are accountable to no one...ever...as they do the same crap as WF did. Actually WF probably learned the schemes from the Canadian chartered vipers. They're masters when it comes to beating down their people and screwing their customers.

ConnectingTheDots's picture

What are these people building or creating that they can make these obscene amounts of money?