Years after Wells Fargo began firing employees en masse for creating fake accounts in order to meet aggressive cross-selling goals, one of Wells Fargo's highest ranking executives said he didn't think there was a problem with the bank's sales culture.
On Wednesday, Wells Fargo's chairman and CEO John Stumpf resigned effectively immediately, pushed out in the wake of the bank's $185 million settlement over the phony account fraud. Officially, Stumpf is retiring. But the bank said he won't receive any severance package, though he will walk away with tens of millions in vested stock.
Last month, Wells Fargo clawed back $41 million from Stumpf, as well as millions more from the former consumer banking division head Carrie Tolstedt, who was also recently announced to be leaving immediately.
But the top ranking Wells Fargo (wfc) executive who denied the existence of a sales problem at the bank, years after Toldstedt and even board members were made aware of the issue, is not leaving the bank. In fact, that executive is not getting punished at all. Instead, Tim Sloan is getting a big promotion.
On Wednesday, Wells Fargo made Sloan the bank's new CEO. Sloan had long been rumored to be in line for the top job.
Back in 2013, Tim Sloan, who was then Wells Fargo's CFO, was the highest ranking official at the bank to be quoted in the Los Angeles Times article that first exposed the sales problems at the bank. The article said that numerous employees had been fired for creating phony customer accounts in order to meet aggressive sales goals. The paper found documents about the aggressive sales goals going back to 2011, as well as employees who said they quit because of the pressure. And it said that a number of lawsuits had been filed against the bank by customers and former employees connected to the sales goals.
Nonetheless, Sloan told The Los Angeles Times at the time that "I'm not aware of any overbearing sales culture."
The bank now admits that the bulk of the 5,300 employees who were fired for the abusive behavior left the bank before Sloan said he wasn't aware of a problem.
A spokesperson for the company declined to comment for this story.
It appears that Wells Fargo's sales problems began even earlier. Earlier this week, Vice reported on a Wells Fargo whistleblower who found employees opening up fake accounts as early as 2005, and contacted Tolstedt about the problem in 2006. Rep. Carolyn Maloney (D-N.Y.) said at a hearing last month that she had found evidence of misconduct dating back to 2007. And in 2009, Fortune wrote a feature story on Wells Fargo that noted how it was pushing customers to open more accounts, and doing so more successfully than its rivals.
Stumpf testified last month that he was not aware of the sales problem until the fall of 2013, shortly before the L.A. Times article, but the bank's board and other senior executives had knowledge of the issue as far back as 2011. The bank has not commented on when exactly Sloan became aware of the problems.
Last November, Sloan, who has worked at Wells for nearly three decades, was promoted to president and chief operating officer, giving him direct control of the bank's troubled consumer unit, as well as areas of the bank. Stumpf testified that it was Sloan who told Tolstedt last summer that, in part because of the cross-selling problems, the bank was "going in another direction," telling her she would be allowed to retire, with stock options intact, instead of being fired. It is unclear whether the decision not to fire Tolstedt, who was in charge of the consumer unit during the entire time Wells Fargo admits the fraudulent behavior occurred, was Sloan's directive, or whether he was just a messenger.
In recent weeks, a number of Wall Street analysts who follow Wells Fargo have pushed for the bank not only to push out Stumpf, but to also scrap its long-established succession plan, which included Sloan. Given the problems at the company, the analysts said—particularly with its culture—Wells Fargo would be better off picking a CEO from the outside.
Longtime banking analyst Dick Bove of Rafferty Capital Markets said J.P. Morgan Chase banking executives Gordon Smith and Daniel Pinto should be considered for the top job at Wells Fargo, saying there needed to be new management at the bank in order to fix it.
Along with Sloan, Wells Fargo named Stephen Sanger chairman of the board, a role that was held by Stumpf as well. Like Sloan, Sanger is no Wells Fargo newbie. He's been on the bank's board since 2003. Sanger is a member of the board committee that, according to the firm's proxy statement, "oversees the company’s incentive compensation practices so that they are consistent with the safety and soundness of the company."
In the past few weeks, Wells Fargo has been widely criticized for having a compensation structure that rewarded sales people for opening accounts, regardless of whether those accounts would actually be used by customers. Wells Fargo has since said that it is ditching sales goals.
What's more, Sanger's committee was also in charge of clawbacks. According to the bank's proxy, the board is supposed to authorize a clawback when, among other things, it is shown that an executive's behavior, or the division he or she is responsible for, damaged the reputation of the bank. Yet, Wells Fargo's board only decided to clawback Tolstedt's pay following widespread outrage that Tolstedt was set to leave the bank with as much as $125 million in stock and options intact, which was first reported by Fortune. Even then, it took the board two weeks to make that decision.
As for Sloan, this past July—the same month he told Tolstedt privately that she was being removed as head of the consumer unit, in part because of the problems in the division—Sloan continued to publicly defend the bank's aggressive cross-selling, saying he didn't see a problem with the strategy, or at least not much. That month, he was asked in an interview by American Banker if he thought there was any reason to believe that the bank may have pushed cross-selling too far. Sloan's answer: not at all.
In fact, Sloan made it clear that if he did eventually get the top job at the bank, he didn't plan to be a change agent. Stumpf, Sloan said, was doing a great job as CEO.
When it came to cross-selling, Sloan said, "The fundamental strategy that we have is not going to change."