Wells Fargo did bad stuff. This isn't much in dispute. Many bank scandals involve a fair amount of nuance and varying shades of interpretation. This one doesn't. The bank was caught with its pants not only down, but removed entirely, crumpled into a ball, and lit on fire. Executives have admitted to the proliferation of sham accounts and investigated retaliation against whistleblowers. Bonuses have been clawed back. Some heads have rolled.
But given the scope and severity of the shenanigans that brought Wells Fargo to this point – a poisonous sales culture cultivated from the top down with production quotas bordering on the fantastical, an ethics regime with all the soundness and integrity of a waterlogged Nilla wafer – it's remarkable how few managers have been axed. Top executives like John Stumpf and Carrie Tolstedt were allowed to resign with a sliver of dignity intact, while just a handful of other top managers have been shown the door. Other than that: crickets.
Earlier this week the bank continued in this vein, eschewing the unpleasant business of firing (that fate is reserved for smaller fish) and instead reshuffling the ranks of a smattering of retail bank executives close to the phony account imbroglio. As the Wall Street Journal reports:
Mary Mack, who took over the embattled retail-banking unit in July, wrote in a memo Tuesday that she was reorganizing groups within the business to expand its focus on roughly 6,000 branches across the U.S. The retail bank oversees about 78,000 employees and serves around 40 million retail-banking customers.
Ms. Mack wrote in the memo, reviewed by the Journal, that while the bank has taken a number of steps to rebuild trust with customers and employees, there is still more work to do. That includes “changes in leadership and how our organization is structured,” she wrote.
Among the executives facing demotions are some familiar names. There's Lisa Stevens, the retail banking executive in charge of the bank's western region and apple of Tim Sloan's eye, whose punishment consists of retaining her region while giving up oversight of small business banking. Then there's John Sotoodeh, whose reign in Los Angeles was marked by steep sales quotas and an regular starring role the bank's annual “Jump into January” sales jamboree.
Mr. Sotoodeh was also one of a group of top retail-bank executives who were warned about possible sales-practices issues as early as 2012. Former head of deposit products Ken Zimmerman, who reported to Ms. Tolstedt, wrote an email in June of that year to a number of retail-banking executives, including Mr. Sotoodeh [...].
The email cautioned about customers getting multiple checking accounts on the same day, an issue Wells Fargo had been looking into. “This is something to keep an eye on,” wrote Mr. Zimmerman, who took a leave of absence in early 2016 and left the company in July, according to a copy of the email reviewed by the Journal. “The regional variation suggests bankers are likely driving some of this behavior” and Wells Fargo may risk a “customer perception that their money isn’t safe.”
Sotoodeh also featured prominently in a November investigative story from Bloomberg: “Wells Fargo’s Stars Thrived While 5,000 Workers Got Fired.”
After Wells Fargo & Co. executive John Sotoodeh handed off more than a hundred branches in Southern California to a colleague in 2009, problems surfaced quickly. His successor, Kim Young, addressing rumors that some employees were opening bogus accounts, called an introductory meeting with staff and warned she wouldn’t tolerate misconduct. Within a few days, managers recall, sales crumbled across her new turf.
Sotoodeh, who started as a teller in 1990, has since climbed even higher. He’s now one of three regional chiefs running the firm’s nationwide consumer-banking empire. Young spent the final years of her four-decade career at Wells Fargo weeding out bad employees, retiring in 2014.
The practices uncovered in the region weren't limited to southern California, but spread ebola-like to anywhere Sotoodeh's team made landfall.
Some of Sotoodeh’s team also got involved with new branches in the Southeast. In 2010, members of his staff went to train Wachovia bankers working under Harmon. Soon after the coaches left, the Wachovia staff discovered debit cards in their mailboxes for Wells Fargo accounts they hadn’t requested, one person said. The bankers learned months later that members of Sotoodeh’s team had used local customers’ identities to help meet sales goals, the person said.
While we can't say for sure who holds ultimate responsibility for the wrongdoing described above, the stench is certainly pungent. So what was Sotoodeh's fate in the recent shakeup?
He now will oversee a region a fraction of the size of his prior role, which had included Texas, according to the memo. As a result, employees directly reporting to him will fall to an estimated 7,000 from 15,000 previously. Mr. Sotoodeh, who previously reported to Ms. Mack, now will report to Ms. Stevens.
Open up a sham account under threat of termination? See ya. Call the ethics line to warn about the same? See ya. Oversee a regime in which the above practices were more or less SOP? Ehh, you might have to update your business cards.
With this kind of accountability, who needs Richard Cordray?