Carrie Tolstedt is retiring with $125 million in compensation. (photo: Getty Images)
Wells
Fargo Fired 5,300 Workers for Improper Sales Push. The Executive in Charge Is
Retiring With $125 Million.
By Renae Merle, The
Washington Post
13 September 16
When
Wells Fargo was hit last week with $185 million in fines after thousands
of its employees were caught setting up fake accounts customers didn't ask for,
regulators heralded the settlement as a breakthrough.
The Consumer Financial Protection Bureau noted
that the $100 million it will collect as part of the deal was the
agency's "largest penalty" ever. The head of Office of the
Comptroller of the Currency, a banking regulator, said its $35 million penalty
would "demonstrate that such practices will not be tolerated and banks
will be held responsible.” “This is a major victory for consumers,” said
Los Angeles City Attorney Mike Feuer, touting the $50 million the city
extracted from the bank.
But the
fines being levied against Wells Fargo pale in comparison to the bank's
yearly profit -- more than $20 billion in 2015.
It is
also less than the more than $200 million that the stock in the company
held by company's chief executive, John G. Stumpf is worth. The fines also are
not that much more than the $125 million one of its top executives, Carrie
Tolstedt, will walk away with when she retires this year. An 27-year veteran of
the bank, Tolstedt ran the community banking division where regulators said
aggressive sales goals fueled illegal behavior by bank employees,
"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.
As
first noted by Fortune Magazine, Tolstedt, 56, retirement
package is expected to reach nearly $125 million, including thousands of shares
of Wells Fargo stock, options, and restricted shares. Tolstedt's has
earned a base salary of $1.7 million for at least the last four years,
according to Securities and Exchange Commission filings. That was set to reach
$1.75 million this year before Tolstedt announced her retirement. She
has typically awarded millions a year in bonuses and Wells Fargo stock.
According
to regulators, thousands of Wells Fargo employees were allegedly involved in a
widespread scheme to reach aggressive sales goals -- and earn bonuses -- by
creating 2 million accounts, including credit cards, customers didn't
authorize. The employees created phony email addresses to enroll existing
customers in online-banking services, for example, and issued them debit
cards they didn’t request. Customers were then often hit with assorted fees for
accounts they didn't know they had, the regulators charged.
Wells
Fargo said it has dismissed 5,300 workers, including some managers,
during the past five years for such illegal practices. They all worked in
Tolstedt's community banking division, the company said.
The
bank is "working to significantly strengthen our training, monitoring,
oversight and compensation structure, which led to a reduction in this behavior,"
Wells Fargo spokeswoman Richele Messick said in an email. "We believe the
changes we have made have strengthened Wells Fargo and will help ensure this
behavior doesn’t happen in the future."
At the
center of the bad behavior appears to be an effort by the bank
to persuade customers to sign up for multiple products, known as
"cross selling." A customer who opened a checking account would be
encouraged to consider a debit card or savings account. This strategy is common
in banking industry, but Wells Fargo is considered particularly aggressive.
The
case has thrust the San Francisco-based bank into a harsh spotlight at a
time when big U.S. banks are still attempting to repair their
reputations following the 2008 financial crisis. Anti-Wall Street rhetoric
has become a common refrain during the presidential campaign and some
advocates are hoping to turn that populist anger into an aggressive
legislative push to rein in the financial industry next year.
The
Wells Fargo case could be used to further galvanize criticism that the Obama
administration has not done enough to banking industry executives
responsible for bad behavior, consumer advocates say.
"There
are two possibilities: Customer abuse was part of business model, in which case
lots of high ranking people need to go to prison," said Bart Naylor, a
financial policy advocate for Public Citizen. "Or the bank is too
big to manage, and folks high up don’t even know that laws are being
broken a few levels down."
The
magnitude of the fraud described by regulators should be thoroughly
investigated, five Democratic lawmakers said in a letter to the head of the Senate Banking
Committee, Richard Shelby (R-Ala.), asking for a hearing on the
case. The lawmakers, including Sen. Robert Menendez of New Jersey,
said Wells Fargo's CEO, John G. Stumpf, should be called to testify.
"It
is difficult to believe a large-scale, coordinated [scheme] like this took
place without knowledge of some higher ups," Menendez said in an
interview.
C 2015 Reader Supported News
Donations can be sent
to the Baltimore Nonviolence Center, 325 E. 25th St., Baltimore, MD
21218. Ph: 410-323-1607; Email: mobuszewski [at] verizon.net. Go to http://baltimorenonviolencecenter.blogspot.com/
"The master class
has always declared the wars; the subject class has always fought the battles.
The master class has had all to gain and nothing to lose, while the subject
class has had nothing to gain and everything to lose--especially their
lives." Eugene Victor Debs
No comments:
Post a Comment