Wells Fargo exec in charge of phony accounts unit gets $125 million payday

by Ryan Smith15 Sep 2016
Wells Fargo may be in trouble, but the executive in charge of the unit that caused the bank’s headaches seems to be leaving the bank with a giant payday.

Wells Fargo just agreed to pay $185 million -- including the largest fine ever imposed by the CFPB – to settle claims that it defrauded its customers. But Carrie Tolstedt, the executive in charge of the unit where the fraud occurred, is leaving the bank with a $124.6 million golden parachute, according to a Fortune report.

Employees in Tolstedt’s unit opened more than 2 million customer accounts – largely without the knowledge or authorization of the customers involved. The practice, known as “sandbagging,” was apparently a routine tactic to drive up sales numbers and earn compensation incentives. Wells Fargo said it had fired 5,300 employees over five years for sandbagging, according to Fortune.

But Tolstedt is departing with $124.6 million in stock and options, according to NPR. And her compensation during the five years the CFPB targeted for investigation included a yearly incentive of $5.5 million in stock – in addition to base pay and bonuses. And despite “clawback” provisions instituted by Wells Fargo in the wake of the financial crisis, the bank does not appear to be moving to force Tolstedt return any of her pay, Fortune reported.

A spokesperson for the bank said Tolstedt’s departure was a result of her own decision to retire after 27 years, according to Fortune. And Wells Fargo CEO John Stumpf said Tolstedt had been “a standard-bearer of our culture” and “a champion for our customers.”

CFPB head Richard Cordray, however, had harsh words for the unit’s incentive programs, which he said encouraged employees to open the unauthorized accounts. According to Cordray, “financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences.”

At the same time, it’s not clear if Tolstedt was aware of the widespread fraud at her unit, Fortune reported. The CFPB did not name her directly in its investigation. Nor did the Los Angeles City Attorney’s Office, which sued the bank over the matter. But a CFPB official said that Wells Fargo itself was aware of the practice of sandbagging for longer than it should have been without stopping it.
 

COMMENTS

  • by Jeff | 9/15/2016 11:29:13 AM

    She should be locked up‼️ No way she did not know about The sandbagging practice.

  • by Tim | 9/15/2016 12:30:40 PM

    What a bad policy to reward employees this way. But nothing compares to the blatant steering of business to companies who are the preferred lender (builders /real estate companies and mortgage lenders) who steer business to the preferred lender and then the client is charged higher rates and costs. Sad this so called legal buying of business is allowed. In the meantime thousands are getting screwed daily!

  • by Jeffrey | 9/15/2016 7:09:18 PM

    I've worked at Wells for a total of 14 years (I'm glad that am gone now) and the practice of opening up these ghost accounts were a common and everyday occurrence until a recently fired manager (out of the Inglewood branch) went to the press and told them what was happening and then the Press took it to the LA City Attorney's office. The City then opened a investigation and then the City Sued Wells Fargo for these deceptive practices.

    Every Branch Manager, District Manager and Market President knew what was going on and how much pressure was placed on the Personal Banker to hit there goals (solutions) daily. You see, most of the Personal Bankers were youth adults and really didn't value their job (like they should) and relented to the pressure that management was putting on them. So they cheated in order to hit their numbers, when the customers discovered that these multiple accounts were opened, they would complain to the Store Manager and the fees/account were closed and the fees returned.

    These employee's that were fired should file a class action lawsuit to really go after management for put these unfair pressure on them to open these accounts.

    FYI...... A deeper dive into Wells Fargo Home Mortgage rate lock extension policy would uncover even more deceptive action from management.

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