Ex-Wells Fargo CEO Fined $17.5 Million, Will Have To Make It On $116 Million Of Parachute Left
Starting in 2011, Wells Fargo began pressuring its employees to create at least eight separate accounts for every customer banking with them — a practice called cross-selling. Pressuring would be putting it lightly — employees were not only given impossible-to-accomplish sales goals, but were routinely screamed at and threatened with the loss of their jobs. They were encouraged to open fraudulent credit cards in the names of customers, create additional fraudulent checking and saving accounts in customers' names and move their money around without their consent to accomplish this, and they even conned homeless people into opening up multiple accounts. Those who complained about the fraud to the company's ethics line were fired and subsequently blackballed in the industry.
Why? Because these high cross-selling numbers raised the value of the company's stock and gave stockholders confidence to invest, and in the wake of new regulations on the banking industry following the 2007-2008 financial crisis, this was one way for those at the top to profit.
This all came to a head in 2016, once the Consumer Financial Protection Bureau and other regulator agencies fined Wells Fargo hundreds of millions of dollars for these illegal activities.
Here, for your edification and entertainment, is Elizabeth Warren's incredible interrogation of then-CEO John Stumpf about all of the fraud.
This week, federal regulators at the Office of the Comptroller of the Currency fined Stumpf $17.5 million and banned him from ever working in banking again.
Via CBS News:
"The root cause of the sales practices misconduct problem was the Community Bank's business model, which imposed intentionally unreasonable sales goals and unreasonable pressure on its employees to meet those goals and fostered an atmosphere that perpetuated improper and illegal conduct," the comptroller said in its complaint.
"Community Bank management intimidated and badgered employees to meet unattainable sales goals year after year, including by monitoring employees daily or hourly and reporting their sales performance to their managers, subjecting employees to hazing-like abuse, and threatening to terminate and actually terminating employees for failure to meet the goals."
Given the fact that he was already retired and will probably not even really miss that $17.5 million, this is mostly a slap on the wrist — but it is still significant that the OCC is now holding individual executives responsible for the fraud. That anything is happening to them at all is a step in the right direction.
"It is misleading to look at the size of the settlement or the proposed fines when assessing the severity of the charges," Jaret Seiberg, a financial services analyst with Cowen Washington Research Group, told investors in a research note. "The OCC both looks at the ability of the individual to pay the penalty and at whether any compensation has been clawed back. The key is that the OCC identified significant players at the bank and penalized them."
Other executives have also been fined and the OCC plans to ban them from working in the banking industry as well. This includes Carrie Tolstedt, the former head of Wells Fargo's community banking business, who is largely considered responsible for creating the culture that led to the fraud. She has been fined $25 million and similarly banned from banking. Her fine was higher than Stumpf's because he settled and she did not.
Still, John Stumpf is going to continue to be rich and will continue to have a very nice life, while many of the customers who got screwed in this fraud have had their lives and credit and ability to trust in financial institutions ruined, while employees who did the right thing — even if they were hired back afterwards — had to go however many years without being able to work in their industry. It doesn't feel fair and it probably never will.
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Robyn Pennacchia is a brilliant, fabulously talented and visually stunning angel of a human being, who shrugged off what she is pretty sure would have been a Tony Award-winning career in musical theater in order to write about stuff on the internet. In addition to her work at Wonkette, she also has a biweekly column at Dame. Follow her on Twitter at @RobynElyse