Wells Fargo & Co. was sued by customers in what may be one of many lawsuits to come after disclosures that bank employees created unauthorized accounts to boost the bank’s fees.
Three Utah customers sued the bank Friday in federal court, blaming the scandal on the bank’s push to increase the number of accounts held by clients to an average of eight – it’s “gr- eight” initiative.
“Wells Fargo quotas are difficult for many bankers to meet without resorting to the abusive and fraudulent tactics,” the customers said in their complaint. “Those failing to meet daily sales quotas are approached by management, and often reprimanded and/or told to ‘do whatever it takes’ to meet their individual sales quotas.”
Wells Fargo agreed to pay $185 million in fines and penalties as part of a settlement with federal regulators this month. The San Francisco-based bank didn’t admit or deny wrongdoing as part of that agreement. The bank fired 5,300 workers – about 10 percent of whom were managers – and said it would eliminate sales goals regulators linked to its cross- selling strategy.
A group of Democratic U.S. senators, led by Elizabeth Warren of Massachusetts, asked Chairman and Chief Executive Officer John Stumpf in a letter dated Thursday whether the bank will claw back top managers’ pay following allegations that employees opened millions of accounts without customers’ knowledge. The lawmakers called out Carrie Tolstedt, who led the unit where the alleged misconduct occurred, saying there seems to be ample justification for recouping at least some of her compensation.
Tolstedt, 56, was head of community banking until July, when the bank announced she was retiring and would be replaced by retail brokerage head Mary Mack, based in Charlotte. She is described as the “chief sandbagger” in the Utah lawsuit, referring to what it describes as Wells Fargo’s practice of failing to open customer accounts in a timely fashion, instead stockpiling them until the next sales reporting period.
Wells Fargo could recoup about $17 million in unvested shares from Tolstedt, according to a Bloomberg analysis of figures compiled from regulatory filings. Cash and stock she already owns – including about $51 million of shares amassed during her 27-year career and $36 million in previously vested stock options – aren’t eligible for claw back, according to the filings.
Wells Fargo shares fell for the sixth straight session Friday, dropping1.6 percent to $45.43. The stock has tumbled 16 percent this year, the worst performance in the 24-company KBW Bank index.
The plaintiffs in the Utah lawsuits seek to represent other customers in a class action and to recover at least $5 million in damages from the bank.
The case is Mitchell v. Wells Fargo Bank, National Association, 16,-cv-00966, U.S. District Court, District of Utah.