Report cites Arizona as an ‘epicenter’ in Wells Fargo’s fake-accounts scandal
California and Arizona cited as having a ‘considerably higher’ number of unauthorized accounts per employee.
Russ Wiles , The Republic | azcentral.com
Arizona was one of two “epicenters,” along with the Los Angeles metro region, of Wells Fargo’s unauthorized-accounts scandal, according to an internal study released Monday.
The report, commissioned by the banking giant’s board, reviewed the improper and unethical sales practices that hurt customers, damaged Wells Fargo’s brand, led to millions of dollars in fines, pressured employees and caused other fallout, according to the study.
The 110-page report prepared by four of the bank’s independent directors and by independent law firm Shearman & Sterling cited a “distortion of the community bank’s sales culture and performance-management system, which, when combined with aggressive sales management, created pressure on employees to sell unwanted or unneeded products to customers and, in some cases, to open unauthorized accounts.”
The unauthorized bank products included checking accounts, savings accounts and credit cards and carried various fees.
California and Arizona had a “considerably higher” number of such accounts per employee compared with other areas of the country where the bank operates, the report said.
READ THE REPORT: Wells Fargo Sales Practices Investigation Report
Conboy’s role in scandal
Wells Fargo paid more than $185 million in fines to regulators, fired CEO John Stumpf and other senior executives, and in February dismissed four top managers in its community-bank division.
One of those managers was Pamela Conboy, the bank’s president in Arizona from 2007 to 2017.
According to the report, Conboy drove Arizona from last place among Wells Fargo’s community-banking markets in sales performance to first place within two years of becoming the regional president.
“Multiple witnesses stated that she did this through employing both effective and appropriate management techniques but also through intense sales pressure, such as a very heavy emphasis on rankings and sales performance,” according to the report.
For example, she conducted multiple daily phone calls to discuss sales reports, launched “rally” days to motivate employees and held “morning huddles” to discuss the prior day’s sales reports. Witnesses told Wells Fargo investigators that Conboy encouraged bankers to sell duplicate accounts regardless of customer need.
Conboy was held up as a model of success by Carrie Tolstedt, the ousted former head of Wells Fargo’s community bank division, and she was asked by Tolstedt to give a presentation at a bank leadership conference in 2010.
The report criticized Tolstedt and other senior executives for failing to pay sufficient attention “to the substantial risk to Wells Fargo’s brand and reputation” from improper and unethical sales practices and for “the potential for financial and other harm to customers.” Tolstedt and others also created a sales-focused atmosphere where employees could be fired or severely criticized by supervisors for failing to meet sales goals.
The result was a “relentless focus on sales, abbreviated training and high employee turnover,” the report said, adding that the bank was at times run more like a department store than a financial institution.
Problems with oversight, responsiveness
Wells Fargo’s decentralized model was partly inherited from Norwest, when the two banks merged in 1998, the report said. Other problems cited by investigators included a community-bank leadership that “resisted and impeded outside scrutiny or oversight” and a corporate CEO who was slow to investigate or critically challenge sales practices.
In response to its unauthorized-accounts scandal, Wells Fargo has replaced several key community-bank leaders, eliminated sales goals, reformed its incentive-compensation practices, split its CEO and chairman positions and created an Office of Ethics that reports to the board.
Stumpf, Tolstedt and several other senior executives have had to forfeit or otherwise surrender more than $180 million in combined compensation.
In compiling the report, the independent directors and Shearman & Sterling said they conducted 100 interviews and searched across 35 million documents.
Reach the reporter at email@example.com or 602–444–8616.