Wells Fargo said Monday that two former senior executives, including its long-time CEO John Stumpf, must return an additional $75 million in compensation after a scathing internal report found the bad sales practices that have rocked the mega bank date back far longer than initially acknowledged.
Senior Wells Fargo executives knew as far back as 2002 - almost a decade earlier than initially disclosed - that bank employees were setting up fake accounts that customers didn't want in order to meet aggressive sales goals, according to the 113-page report by the bank's independent directors.
In addition, Shearman & Sterling reviewed the product of hundreds of interviews of more junior employees conducted by or on behalf of Wells Fargo. Structurally, the bank was too decentralized, with department heads like Tolstedt given the mantra of "run it like you own it", and enjoying broad authority to shake off questions from superiors, inferiors, or lateral colleagues. Regional managers were imploring their bosses to drop sales goals, saying they were unrealistic and bad for customers.
The bank's board wrestled with how widespread the problem was. The bank was also fined by the Los Angeles City Attorney and the U.S. Comptroller of the Currency. Tolstedt, who ran the community bank - Wells Fargo's term for the branch network - was told to fix the problem she had created.
"Tolstedt and certain of her inner circle were insular and defensive and did not like to be challenged or hear negative information", the report stated. The board said Carrie Tolstedt, former head of community banking, was sacked with cause.
"(They) resisted and impeded scrutiny or oversight from corporate risk management and the board and, when forced to report, minimized the scale and nature of problems.
"There was a disinclination among the Community Bank's senior leadership, regardless of the scope of improper behaviour or the number of terminated employees, to see the problem as systemic", the report said. The bank emerged largely unscathed from the 2008 financial crisis largely because it hadn't engaged in the sort of fraudulent and irresponsible practices that crippled other major institutions and almost collapsed the global economy.
Tim Sloan, who replaced Stumpf as chief executive, escaped without much critique in the report. As president and chief operating officer, he became Tolstedt's immediate supervisor in November 2015. In July 2016, he informed her that she no longer would lead the community bank and would retire, the report says.
The scandal has cost the CEO, John Stumpf (and Warren Buffett's favourite banker) his job and millions of dollars in benefits, other senior executives lost retirement benefits and options, and others were censured.
For example, the board didn't learn until legal settlements were announced in September 2016 that the bank had fired about 5,300 employees as a result of the scandal.
Two influential advisory firms have also recommended significant changes to the company's board.
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Following the completion of the transaction, the director now directly owns 1,000 shares in the company, valued at $49,040. Crow Point Partners LLC purchased a new position in Delta Air Lines during the third quarter valued at $106,000.
The report criticized the board for not centralizing the risk functions at the bank earlier, not requesting more detailed reports from management and not insisting Stumpf get rid of Tolstedt sooner.
Sanger, a board member since 2003, is under pressure to assure investors and regulators that he is rooting out the bank's problems after a welter of criticism that the board did not do enough despite knowing about the problem since 2014.
Strengthened our ethics and risk management, including creating a new Office of Ethics, Oversight, and Integrity; adding protections so anyone can feel safe reporting his or her concerns to our Ethics Line; and expanding our training for our managers and bankers, so they can better respond.
ABC News has been unable to reach either of them.
A graduate of the University of Nebraska, Tolstedt joined a Wells' predecessor bank called Norwest in 1986, rose to oversee branches in Omaha, then all of them in 39 states. African Americans are a part of this customer base for Wells Fargo bank.
Stumpf was grilled by the U.S. Senate Banking committee on September 28, drawing criticism from the committee for "failing to answer many questions".
The report goes on to document what has been widely reported here and elsewhere - that over the years Wells Fargo created millions of accounts for customers who never authorized them.
Tolstedt declined for an interview and she rejected the conclusion revealed by the board.
The justice department is still investigating the bank's practices.
Investigators found no evidence of retaliation in the cases of 11 ex-employees who were publicly identified as whistleblowers in media reports, according to the report.
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