Monday, September 12, 2016

Wells Fargo Exec Who Headed Phony Accounts Unit Collected $125 Million

No surprise, normal way of doing business.

by Stephen Gandel
Sept. 12, 2016

Wells Fargo & Co’s wfc “sandbagger”-in-chief is leaving the giant bank with an enormous pay day—$124.6 million.

In fact, despite beefed-up “clawback” provisions instituted by the bank shortly after the financial crisis, and the recent revelations of massive misconduct, it does not appear that Wells Fargo is requiring Carrie Tolstedt, the Wells Fargo executive who was in charge of the unit where employees opened more than 2 million largely unauthorized customer accounts—a seemingly routine practice that employees internally referred to as “sandbagging”—to give back any of her nine-figure pay.

On Thursday, Wells Fargo wfc agreed to pay $185 million, including the largest penalty ever imposed by the Consumer Financial Protection Bureau, to settle claims that that it defrauded its customers. The bank’s shareholders will ultimately have to swallow the cost of that settlement. The bank also said it had fired 5,300 employees over five years related to the bad behavior.


Shortly after the financial crisis, big banks in the nation, including Wells Fargo, promised that their top bankers would not be able to keep large paydays if it was found that those rewards were gained through harmful conduct. It was supposed to be the stick to the carrot of Wall Street bonuses. But the latest example of fraud at Wells Fargo shows that the big banks are unwilling to wield those sticks, especially when it comes to their top executives.


in bringing the charges, an official from the CFPB said Wells Fargo was aware of the behavior for longer than it should have, without putting a stop to it.


Tolstedt was regularly praised for her unit’s ability to get customers to open numerous accounts. For a number of years, Wells Fargo’s proxy statement, which details executive pay, cited high “cross-selling ratios” as a reason that Tolstedt had earned her roughly $9 million in annual pay. For instance, in Wells Fargo’s 2015 proxy statement, the company said that its compensation committee had authorized Tolstedt’s $7.3 million stock and cash bonus that year, because “under her leadership, Community Banking achieved a number of strategic objectives, including continued strong cross-sell ratios, record deposit levels, and continued success of mobile banking initiatives.”

Later that year, the L.A. City Attorney’s office sued the bank because of its sales tactics, saying that many of the abusive practices came from intense pressure on Wells Fargo’s employees to get customers to open up numerous accounts. A separate class action of former employees alleges they were fired for not meeting cross-selling goals, or going along with the aggressive sales tactics.


When Tolstedt leaves Wells Fargo later this year, on top of the $1.7 million in salary she has received over the past few years, she will be walking away with $124.6 million in stock, options, and restricted Wells Fargo shares. Some of that hasn’t vested yet. But Tolstedt gets to keep all of it because she technically retired. Had she been fired, Tolstedt would have had to forfeit at least $45 million of that exit payday, and possibly more.


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