[Photo: Wells Fargo Ex-CEO John Stumpf]

Former Wells Fargo CEO John Stumpf and former head of the bank’s retail division, Carrie Tolstedt took a combined retirement haircut of more than $75 million, following the release of a long-awaiting internal report by the bank’s board of directors.  

• John Stumpf will forgo $28 million of his 2015 bonus that was paid in March 2016.
• Carrie Tolstedt was retroactively terminated for cause, and will forfeit $47.3 million in outstanding stock options.

The 110-page report contained the findings of an investigation carried out by a special board committee headed by Wells Fargo Chairman Stephen Sanger and 3 other independent directors. Shearman & Sterling assisted. Most of the blame for the sales scandal was directed at Ms. Tolstedt and her team. Among other things, they were accused of cultivating a bank culture that led to the sales scandal, and they ignored the systemic nature of the problem.

Tolstedt was further accused of obstructing the board’s efforts to get to the bottom of what was going on. She reportedly hid the scale of the misconduct from the board, which only discovered that 5,300 staff had been fired for opening more than 2 million unauthorized accounts when the bank reached a $185 million settlement with regulators in September last year.

"Even when challenged by their regional leaders, the senior leadership of the Community Bank failed to appreciate or accept that their sales goals were too high and becoming increasingly untenable."

 

"It was convenient instead to blame the problem of low quality and unauthorized accounts and other employee misconduct on individual wrongdoers."

 

"Effect was confused with cause. When Wells Fargo did identify misconduct, its solution generally was to terminate the offending employee without considering causes for the offending conduct or determining whether there were responsible individuals who, while they might not have directed the specific misconduct, contributed to the environment that increased the chances of its occurrence."

The report was also critical of Stumpf, who was described as blinded by Wells Fargo’s cross-selling success and his refusal to believe that the model was seriously impaired. Stumpf went so far as to describe Tolstedt as “the best banker in America.”

TIM SLOAN UNSCATHED.    Tim Sloan, who succeeded Stumpf as CEO, is described in the report as having little contact with sales practices at the bank before becoming COO and Tolstedt’s boss in November 2015. Six months later he told her to step aside.