Last week on Thursday Wells Fargo (WFC) came to an agreement with the Consumer Financial Protection Bureau (CFPB), the office of the Comptroller of the Currency (OCC) and the Los Angeles attorney office over allegations that it opened ghost accounts on behalf of clients without the clients even knowing about them. The bank will pay a total of $185 million in fines, plus another $5 million in the form of customer remediation to refund its clients. “We regret and take responsibility for any instances where customers may have received a product that they did not request,” Wells Fargo said in a statement. The company reached an agreement that it believes is consistent with its commitment to its customers.
An earlier investigation by the LA times found that in order to meet quotas, employees opened unneeded accounts for customers, ordered credit cards without customers’ permission and even forged client signatures on paperwork. Some employees begged their family members to open ghost accounts without the intention of using them. This was seen as part of the culture at the bank, which encouraged employees to open as many accounts as possible. In the end about 2 million unnecessary accounts were opened and then Wells Fargo’s clients were charged for those accounts without their consent in the matter at all. After the scheme had been exposed Wells Fargo fired 5,300 of its workers for their improper sales push.
Of the total $185 million fine, $100 million will go toward the CFPB’s Civil Penalty Fund, $50 million will be paid to the City and County of Los Angeles. and the remaining $35 million will go to the Office of the Comptroller of the Currency. Wells Fargo (WFC) stock is down about 7% over the last 5 trading days in part because of this incident. Despite this concern many analysts are still bullish on the outlook for WFC stock. But the financial institution still has the highest market valuation among any bank in America, worth just north of $250 billion. The bank’s largest shareholder is a company called Berkshire Hathaway (BRKA), which is an investment firm run by the famous investor, Warren Buffett.
But bad news for Wells Fargo continue to pour in. This week new backlash is mounting for the banking giant because one of its ex-executives, Carrie Tolstedt, who oversaw the situation while the fraudulent problems were happening has now parted ways with the company after receiving a surprisingly large paycheck of $124.6 million.
Tolstedt was Wells Fargo’s senior executive vice president of community banking and was part of the managing unit that oversaw the opening of all those unnecessary customer accounts. Many people believe Tolstedt to be at least partially responsible for what happened there. If she had been fired then she would not be receiving such a large paycheck. But because the company claims that she’s retired or quit on her own, there is no wrongdoing on her part. It’s hard to believe that such a large-scale, coordinated sales campaign like this took place without the manager of the group knowing about it.
But the company defends her. John Stumpf, CEO of Wells Fargo says “A trusted colleague and dear friend, Carrie Tolstedt has been one of our most valuable Wells Fargo leaders, a standard-bearer of our culture, a champion for our customers, and a role model for responsible, principled and inclusive leadership.” Wells Fargo just wants to put this matter behind and move forward. But if Carrie Tolstedt is such a great representative of Wells Fargo then many people are raising questions about the values of the rest of the company.
This author doesn’t own any shares in the companies mentioned in this post.