New Wells Fargo CEO Tainted By Scandal As Well

If Wells Fargo thought CEO John Stumpf’s resignation was going to change the dynamic as the bank dealt with the scandal of massive fraud in opening bogus accounts, they are sadly mistaken. The new CEO, Timothy Sloan, was actually a direct report of Carrie Tolstedt, the head of the community banking division where the decade-long fraud occurred. In addition, even as late as this summer, he was defending the bank’s strategy of aggressive cross-selling that prompted the fraud in the first place. Under that cross-selling plan, account managers were pushed to sell accounts for other business lines to their existing customers with highly aggressive sales targets and bigger bonuses as incentives. Maxine Waters, the ranking Democrat on the House Financial Services Committee expressed her concern, saying, “I remain concerned that incoming C.E.O. Tim Sloan is also culpable in the recent scandal, serving in a central role in the chain of command that ought to have stopped this misconduct from happening.” The fact of the matter is that pretty much all of the current senior executives who are in any position to replace Stumpf are in some way tainted by this scandal. And that only goes to show how corrupt the corporate culture at Wells Fargo had become.

I’d also like to make one other point that is surely worth investigating at Wells Fargo. A significant number of employees who came forward to report the opening of these fraudulent accounts were directed to the bank’s ethics hotline. I do not know Wells Fargo’s policies, but my recollection from my time in the industry is that those hotlines “guaranteed” anonymity. No one really believed that and the fact that many of these whistleblowing employees at Wells Fargo were subsequently fired for seemingly minor infractions certainly indicates that their anonymity was not protected. I certainly hope the regulators and the prosecutors will look into that possibility.