Wells Fargo Lawyers Were Too Cost Focused, Report Says

Senior Wells Fargo executives knew as far back as 2002 - almost a decade earlier than initially disclosed - that bank employees were setting up fake accounts that customers didn't want in order to meet aggressive sales goals, according to the 113-page report by the bank's independent directors.

The announcement came in a report released by the board that named Stumpf and Tolstedt as the two most prominent senior executives who have left the company due to their roles in the scandal. "It is laughable to claim that only two senior executives should be terminated and meaningfully held accountable". Independent members of the banks' board launched an investigation. However, the board said that it was common to blame the employees for violating the rules without analysing the reason that led them to do the unlawful act.

In the investigation, law firm Shearman & Sterling conducted 100 interviews with current and past workers, reviewed more than 35 million documents and coordinated with FTI Consulting to conduct forensic analysis of the bank's digital archives.

Altogether, Stumpf lost $69 million in compensation and Tolstedt $67 million, which previously include $41 million from Stumpf and $19 million from Tolstedt in forfeited unvested equity awards.

"(They) resisted and impeded scrutiny or oversight from corporate risk management and the board and, when forced to report, minimized the scale and nature of problems".

However, the board's concluded that Sloan had little direct involvement in the questionable sales practices. Sloan, who has been at the bank for about 29 years, said the bank was focused on mending fences with customers.

Tolstedt's lawyer, Enu Mainigi of the Washington firm Williams & Connolly, issued a statement challenging the board's findings.

The board said it did not learn that 5,300 employees had been fired as part of the scandal until they were told as part of the regulatory settlements.

As for how executives responded to problems within the sales division, the report states, "Tolstedt and certain of her inner circle were insular and defensive and did not like to be challenged or hear negative information". That investigation eventually led to the Los Angeles City Attorney's Office to file a lawsuit against Wells for its sales practices, which in turn caught the attention of federal authorities, most notably the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency.

"I have worked over the weekend with Carrie on the LA issue - I really feel for Carrie and her team", he wrote. A subordinate sent her a report in 2013 that included a table of incidents and terminations, but she didn't recall reviewing it in detail.

Lisa Stevens: The regional manager was a "vocal advocate" within the community bank for changing sales goals and the behavior they encouraged, according to the report.

However, that was not even a quarter of the total $286 million in compensation he acquired during the 2011-2016 period that encompassed the time during which the scandal emerged publicly.

Despite the embarrassing revelations, Wells Fargo's longtime CEO John Stumpf was able to retire last fall with more than $83 million by exercising all of his vested stock options, which he had amassed over a 34-year career. She raised concerns with senior employees outside the division including the bank's chief risk officer, Michael Loughlin. At the same time, the report found that the quality of the new accounts continued to decline.

While there is nothing wrong with operating a large company like Wells in a decentralized fashion, the board said, the structure backfired in this case by allowing Tolstedt and other executives to hide the problems in their organization from senior management and the board of directors. The Board of Directors has elected Catherine A. Suever, now Vice President and Controller and acting Chief Financial Officer, to succeed Mr. Marten as Executive Vice President - Finance and Administration and Chief Financial Officer, effective immediately.

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