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The Wells Fargo Scandal: Is the Profit Model to Blame?

The fines came from a combination of California and federal regulators who alleged that the practice was being used to meet aggressive sales goals.

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Wells Fargo (WFC) stock dropped almost 4% on Tuesday after the bank announced plans to abandon its sales targets where customers were sold multiple bank products.

Chief Executive Officer John Stumpf also sent an e-mail to customers on Wednesday apologizing for the actions.

“Tolstedt’s team is a leader in building and deepening customer loyalty and team member engagement across the business, which today serves more than 20 million retail checking households and 3 million small business owners, and employs 94,000 team members”, the company said in a statement last July announcing her retirement.

“Wells Fargo is and has engaged in activities that are unbecoming of a bank and that’s being kind”, said Rep. Al Green of Texas.

Stumpf addressed concerns that only low-level workers have been punished for what regulators and employees described as widespread, systemic problems at Wells Fargo.

Get ready for fireworks next week when Elizabeth Warren grills Wells Fargo’s CEO over the bank’s mind-boggling creation of millions of fake accounts.

The company has so far terminated 5,300 employees it says were responsible, and John Shrewsberry, Wells Fargo’s CFO, says the company will investigate further “at all levels of the organization”, Reuters writes. They all worked in Ms. Tolstedt’s community banking division, the company said.

“It seems Wells Fargo’s board has equipped themselves with a broad enough tool that, if they think the situation warrants it, this clawback provision could (apply to Tolstedt)”, said Charles Tharp, a senior adviser at the Center for Executive Compensation. “We believe the changes we have made have strengthened Wells Fargo and will help ensure this behavior doesn’t happen in the future”.

An outside consultant examined more than 82 million deposit accounts and about 11 million credit-card accounts opened since 2011, Shrewsberry said.

Last week, the San Francisco-based bank paid multiple fines to regulators totalling $185m after finding many of its customer’s accounts were either falsified or opened without permission. It said 115,000 of those accounts had incurred a fee that Wells Fargo has since refunded to customers.

Richard Shelby, said the committee planned to hold a hearing September 20.

At the Delivering Alpha conference Tuesday, Treasury Secretary Jack Lew said the case shows the need for strong banking regulation. “Cross-selling is one of the reasons Wells Fargo is said to be so successful”, he says of the bank, which along with its parent of the same name, controls some $1.9 trillion in assets.

Fortune first reported Monday that Tolstedt would leave the company with a large payout despite having been in charge of the division.

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He said the bank will “take a big wide fresh look at who knew what and when and what else might have been done”.

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