Wells Fargo’s board has spent more than half a million dollars on lobbyists in the past year as it’s pushed to move past a major sales scandal over fake accounts, new disclosures show.
The board has paid $600,000 to Brownstein Hyatt Farber Schreck – among the largest lobbying firms in Washington – from Oct. 1, 2016, to Sept. 30, an Observer search of lobbying activity on Opensecrets.org found. Federal reports filed by Brownstein show the firm has received $150,000 every quarter since the scandal erupted in September 2016.
The lobbying comes at a time when the board is making some changes, including plans for Chairman Stephen Sanger and two other longtime directors to retire at the end of the year. Such moves haven’t been enough, though, for some members of Congress who want the removal of more directors.
It’s also further evidence of how the scandal continues to cost the San Francisco-based bank, which agreed last year to $185 million in penalties to resolve claims employees opened accounts without customer permission. Wells has said it’s also spent millions of dollars on refunds to affected customers.
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In February, the Observer was first to report on the lobbying spending by Wells’ board. The Observer found the directors had paid $150,000 on lobbying as of the last three months of 2016. That spending was for “issues related to congressional investigations of Wells Fargo & Company,” according to the short description on disclosures.
The board’s lobbying has raised eyebrows for what experts say is an unusual move. That’s because, while it’s quite typical for companies to use lobbyists, it’s not a normal practice for a board.
“The notion of a board spending corporate funds for lobbying is highly unusual,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
“Boards are not there to lobby. Boards are there to monitor management,” Elson said. “It’s basically out of the purpose of the board.”
In a statement, a spokesperson for the board pointed to inquiries the body has received at the state and federal level. “The board believed it appropriate to retain their own advisers relative to responding to these and other questions,” the spokesperson said.
Wells Fargo declined to comment. Brownstein did not respond to requests for comment.
According to federal disclosures, Brownstein works for Wells’ 15 independent directors. The label applies to directors who aren’t Wells employees or who meet other criteria, such as not having specific financial ties to the company. The only non-independent board member is CEO Tim Sloan.
The lobbying has come as some in Congress continue calling for the removal of board members in place during the years the scandal was unfolding. Sen. Elizabeth Warren of Massachusetts and Maxine Waters of California, both Democrats, have especially pushed in recent months for the removals.
In hiring Brownstein, Wells’ board has picked a shop whose clients have included big names like Amazon.com, Johnson & Johnson and Toshiba Corp.
An Observer search of lobbying activity on Opensecrets.org found no examples of board lobbying by more than a dozen firms that have faced large scandals – from energy company Enron to, more recently, automaker Volkswagen, drug company Mylan and ride-hailing app Uber.
Denis Arnold, professor of business ethics and management at UNC Charlotte, called the hiring of lobbyists by Wells’ board surprising.
“It suggests they’re more interested in buffering themselves against external criticism and regulation, rather than focusing on internal changes to ensure that these types of practices never take place again,” he said.
The lobbying spending by Wells’ board also comes at a time when the company is aiming to slash $4 billion in annual expenses by the end of 2019.
Those cuts come as Wells grapples since the scandal with the loss of some government contracts, difficulties growing primary-consumer-checking accounts and revelations of other practices affecting customers.
This month, Wells Fargo said its third-quarter earnings fell 18 percent from a year ago to $4.6 billion after it set aside $1 billion to cover expenses associated with mortgage investigations.