When Wells Fargo took over Charlotte-based Wachovia in 2008, it was widely seen as the white knight rescuing a bank on the verge of failure.
But when the San Francisco-based bank began rolling out its sales procedures in branches in the coming years, some employees at Wachovia, long known for its strong customer service, recoiled at the bank’s aggressive sales goals.
“Everyone was just on pins and needles,” said a former Charlotte-area Wachovia banker who left over the sales practices. “You didn’t feel like you were doing enough. If you met with a new client and got some new accounts, you would get coached as to why you didn’t do more for them. It was just unreal.”
Last month, Wells agreed to pay regulators $185 million to settle allegations that its employees opened 2 million unauthorized accounts to meet sales targets. But the fallout for the bank is continuing, with lawmakers calling for CEO John Stumpf to step down, a variety of agencies investigating and the bank’s stock price continuing to fall.
For more than 23,000 Wells employees in Charlotte, the scandal is another gut punch to workers who have spent eight years moving on from the damage Wachovia sustained during the financial crisis. The latest controversy has dented their stock holdings, raised uncertainty about their leaders and brought another round of public criticism to their employer.
Some employees, however, are also feeling a sense of vindication, after complaining about Wells Fargo’s sales approach or disagreeing with other changes the bank implemented after the merger.
For Charlotte as a whole, the controversy once again tarnishes one of the city’s premier industries, at a time when the city’s other big bank, Charlotte-based Bank of America, has shown signs of putting its troubles from the financial crisis in the past. And once again, a big bank needs to win back customers and investors who have suffered from its misdeeds.
Wells Fargo to the rescue
In September 2008, after Lehman Brothers filed for bankruptcy protection and Bank of America scooped up Merrill Lynch, Wachovia became one of the next big banks in danger of faltering in the roiling financial crisis. It had inherited troubled mortgages from its 2006 purchase of Golden West Financial and created problems of its own in its investment bank.
New CEO Bob Steel began shopping the bank to potential buyers and in a frenzied weekend in September the government brokered a sale to Citigroup. But before the deal could close, Wells Fargo swooped in days later with a higher offer that was seen as tie-up with a much sounder bank.
The merger proceeded better than most had expected. Wells cut jobs, but it wasn’t a massive bloodletting. The city kept some top executives, and the bank continued to contribute to arts and community groups. The bank as a whole produced record profits and saw its stock soar, while rivals Bank of America and Citigroup struggled to regain their footing.
Although Wells is based in San Francisco, Charlotte is now the biggest employee hub, with workers in a wide range of business lines.
“From a Charlotte perspective, if anyone had to buy Wachovia I’m glad it was Wells Fargo,” said a former Wachovia executive who stayed on with Wells Fargo. “We still have high-level people in Charlotte and the employee base here is very strong.”
Like other current and former employees the Observer spoke with for this story, he talked on condition of anonymity to protect his career.
The latest scandal isn’t as far-ranging as the financial crisis that cratered the world economy, but it’s been tough on employees, the executive said.
“It’s just an embarrassing situation,” he said. “Nobody is proud about it. They’re upset, agitated. The vast majority of people are doing the right thing for their clients, and they get the rug pulled out on them and have their integrity challenged.”
The controversy has also hit employees in the pocket book. The stock is down about 12 percent, and some worry that next year’s bonuses could be affected. The bank has already announced that it’s ending sales goals in its branches, but has said it wants to make sure the change doesn’t hurt employee compensation.
For some former Wachovia employees who have disagreed with how the merger has been handled, the scandal is a sign of Wells Fargo’s poor management, a technology employee said.
“Legacy First Union/Wachovia employees are saying, ‘We told you so!” said one Wells Fargo technology worker in Charlotte who came from First Union and Wachovia predecessor banks.
Still, these employees are worried that their careers could be damaged by the scandal, he said. The Wells Fargo name “certainly isn’t going to look good on a resume,” he said.
Branch workers who faced intense sales pressure once Wells Fargo took over are also feeling relief now that the bank’s policies are coming to light.
“I was very happy to see that it was finally coming out,” said the former Wachovia employee who moved to another bank because of the sales pressure. “I really felt like I was trying to protect my clients from the bank.”
Since the settlement, CEO John Stumpf has faced two severe grillings from lawmakers on Capitol Hill, with some calling on him to quit or to face prosecution. Last month, the bank’s board announced that Stumpf would forfeit all of his outstanding unvested equity awards, worth $41 million, and forgo his salary during a board investigation.
The Labor Department has also announced plans to review how the bank treated its employees, federal prosecutors are investigating and some states are pulling business with the bank.
Stumpf told lawmakers that he was “deeply sorry” for the bank’s actions and took responsibility. In a memo to employees last week, he praised their dedication to customers and said it was a privilege to lead them.
“We have weathered many storms over our 164-year history,” Stumpf said in the note. “We will weather this one, too.”
The former Wachovia executive who has stayed with Wells Fargo said it will take time to win back customers’ trust.
“The name and brand have been tarnished,” he said. “I don’t know how long it will take to repair, but it won’t happen over night.”