Last week, regulators fined Wells Fargo $185 million for opening millions of bank account and credit cards without its customers' permission. Now, five U.S. senators are asking the bank if it still plans to pay millions of dollars in bonuses to executives and board members who oversaw the practice.
In the letter to Wells Fargo Chairman and CEO John Stumpf, Democratic Sens. Elizabeth Warren, Sherrod Brown, Harry Reid, Robert Menendez and Jeff Merkley pinned the blame for the fraud on the company’s business model.
“This was not the work of a few rogue employees,” the letter reads. “Wells Fargo had a long-standing, systemic problem created by stringent sales quotas and incentives imposed by senior management.”
The Democratic lawmakers asked the Wells Fargo board if it will invoke its “clawback authority,” a legal mechanism to rescind compensation from employees whose performance is later judged to be based on false representations or “inaccurate performance metrics.”
Wells Fargo spokeswoman Jennifer Dunn did not say how the company would respond.
“Clawing back compensation is a decision for our board of directors,” she told IBT in an emailed statement.
The fraud at issue was first uncovered by the Los Angeles Times in 2013. The newspaper’s investigation revealed the bank created false bank accounts and credit cards, which allowed Wells Fargo to charge customers fees and fines for services for which they never asked.
In their letter, the senators singled out Carrie Tolstedt, Wells Fargo’s recently retired senior executive vice president of community banking, who is set to receive up to $125 million in compensation as she retires. Much of the fraud occurred during Tolstedt's tenure in the Community Banking division. She received $5 million in bonuses 2011-15, the period when regulators say the fraud occurred.
Wells Fargo has already fired more than 5,000 employees in the fraud, but so far the company has laid the blame at the feet of low-level workers. More than 90 percent of those fired were ranked lower than a branch manager.
“The people who we’re talking about here weren’t the high performers,” Wells Fargo Chief Financial Officer John Shrewsberry said at a recent conference. “It was really more at the lower end of the performance scale, where people apparently were making bad choices to hang on in their job.”
Officials with the Consumer Financial Protection Bureau, which levied the fine in conjunction with several local regulators, dispute that characterization. They blamed sales goals set at the executive level for incentivizing the bad behavior.
The senators ask for a response before Sept. 19, a day before Stumpf is scheduled to appear before the Senate Banking Committee.