In the wake of the monster scandal that cost Wells Fargo & Co. $185 million in fines and over 5,000 bank employees their jobs, one may wonder: Why is the bank’s chief executive and chairman John G. Stumpf still in charge?
On Sept. 8, the banking giant reached a costly settlement with Los Angeles City Attorney Mike Feuer, the Consumer Financial Protection Bureau, and the Office of the Comptroller of the Currency. CFPB alone will receive $100 million in fines, which is the largest fine in its entire existence.
The deal followed a 2013 investigative report which had revealed a scheme Wells employees and managers had set in place to reach unrealistic sales targets. Under the scheme, bankers opened more than 2 million phony accounts on behalf of their clients without asking permission.
Between 2011 and 2015, 5,300 employees involved in the scheme lost their jobs, the bank said. Yet, the company remained very secretive about what disciplinary measures were taken to punish the top-ranking management.
The media has accused the bank that it has pushed its employees to resort to that scheme through incentives and other bonuses. But Stumpf said those incentives were not granted to “do bad things.”
Critics, however, believe Stumpf should be held accountable for the fraudulent activities within the bank. For instance, Carrie Tolstedt who managed a division involved in the scandal was required to directly report to Stumpf any suspicious activities.
So, it is unclear whether Stumpf knew about the scheme or no. In the first case, he should be charged with fraud, while in the second scenario he should at least pay for failing to prevent a hard blow to the company’s reputation.
Either way, he should have lost his job at Wells under the settlement, and so should have other board members.
On Tuesday, Stumpf was present at a hearing at the Senate Banking Committee. Analysts believe that such hearings rarely have positive outcomes. Usually, they are just opportunities for lawmakers to show just how crooked the banking system rally is. But in reality, regulations do not change.
Experts expect Stumpf to have a real hard time when facing Sen. Elizabeth Warren, who summoned him at the committee. Warren has also asked Wells Fargo to tell her where the money Tolstedt had siphoned is.
Nevertheless, analysts expect from Stumpf to come with the same defense he had used during the scandal: that the fraud was the work of thousands of lower-ranking employees who interpreted wrongly his directions.
Even though he said in a Wall Street interview he gave no incentive to do bad things, actions speak louder. Top management’s surreal sales goals forced employees to find new ways to reach them.
Feuer’s lawsuit against the bank clearly showed that “unrealistic sales quotas” promoted “fraudulent behavior within the bank.
Stumpf added that those “rogue” employees represent 1 percent of the company’s workforce. So, by no means these people reflect the bank’s culture.
“That’s a false narrative,”
Experts noticed Stumpf is lying again. The 5,300 workers who lost their jobs account for more than that. Wells Fargo currently boasts 270,000 employees. So, the sacked employees’ are enough for their actions to represent the banking giant’s culture.
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