Wells Fargo hit with class action lawsuit over sales practices

Josh Kim
September 27, 2016

On September 8, 2016, the U.S. Consumer Financial Protection Bureau ("CFPB") imposed a fine of more than $185 million on Wells Fargo and published a Consent Order detailing the Company's fraudulent practices, which were centered on a corporate culture intent on growing its cross-selling opportunities and unlawfully and without its customers' consent opening millions of unauthorized deposit and credit card accounts.

US Labor Department Secretary Thomas Perez on Monday pledged to conduct a " top-to-bottom" review of all cases, complaints and other alleged violations that the department has received concerning Wells Fargo in recent years.

"Consequently, Wells Fargo's managers and bankers have for years engaged in unethical and illegal practices called 'gaming, '" according to the lawsuit. Workers secretly opened more than 2 million unauthorized accounts - funding them with customers' money, without their knowledge - to meet sales goals and earn bonuses, federal authorities said.

It was unclear how much of Stumpf's or Tolstedt's compensation would be clawed back, but the Journal estimated that Stumpf's total compensation while at Wells has been around $160 million.

Plaintiff seeks to recover damages on behalf of all purchasers of Wells Fargo common stock during the Class Period (the "Class").

Regardless, a handsome pay package in light of the scandal could stir further outrage.

Carrie Tolstedt, who until July was the senior executive vice president in charge of community banking, stands to walk away with roughly $90 million, the Equilar assessment determined. Jeff Merkley said that the executive should resign or be fired.

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For Stumpf, the retirement package breaks down this way: stock valued at $74 million; unvested shares of stock eligible for retirement valued at $25.2 million; a pension worth almost $20 million; and deferred compensation valued at $4.4 million, according to the Equilar estimates.

The 31-month low for Wells Fargo stock is likely to push more people to call on the company to replace longtime CEO John Stumpf.

"If the company's profits were achieved through nefarious means, or there is a belief it was nefarious, then it's up to the board of directors to make a decision on that", Marcec said.

The quotas, or sales goals, at the heart of the suit, have been central to the scandal that has rocked the bank since it was revealed on September 8.

In other Wells Fargo & Co. news, COO Timothy J. Sloan sold 20,500 shares of the business's stock in a transaction dated Monday, August 8th.

He said Stumpf should cut his own compensation this year, detail clawbacks for other key executives and the Wells Fargo board should consider separating the dual titles of CEO and chairman that Stumpf now holds. And I wanted to hear directly from Stumpf about how faulty monitoring of the sales incentive programs he and his executives pushed went so wrong that the company broke that trust on such a massive scale.

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