Carrie Tolstedt is the Wells Fargo executive who presided over a titanic, multi-year fraud through which at least 5,300 of the employees who reported to her opened up fake accounts in Wells’ customers’ names, racking up fees and fines, trashing the customers’ credit ratings, and, incidentally, pulling in record revenues for Tolstedt’s department, which Wells’ management recognized by giving her a $125M parting gift when she left the company at the end of July, just weeks before the scandal broke.
Wells Fargo has a policy through which bonuses can be clawed back if it’s later determined that their beneficiaries participated in illegal or unethical conduct.
Wells Fargo will not invoke that policy in Ms Tolstedt’s case, possibly because she has $125M with which to hire lawyers to fight such an action.
In related news, Wells Fargo has announced that it is killing its policy of paying bonuses to employees for meeting sales targets.
As we said in our initial post, it’s disturbing that regulators failed to target individuals, particularly for such a crass, systematic, and large scale fraud, and to add insult to injury, demanded a paltry fine. They apparently fell for the excuse that the damage per customer was $25, mere chicken feed. But the cost to them in terms of hassle, and most of all, credit score damage, which is a serious black mark for job-seekers and anyone looking for a mortgage or other loan, means the monetary losses are a poor measure of actual harm. So I hope readers whose Senators are on the banking committee will e-mail or call them and tell them they need to ask the bank regulators why they are punishing bank shareholders rather than the real perps, the executives who tolerated or encouraged this fraud.But it is also telling that this case has elicited so much interest because the victims were clean. Other types of bank fraud, which have typically resulted in far more damage to the victims, such as foreclosure abuses, payday loans, debt collection cons, have stirred proportionally less outrage….because the target was typically a borrower and could be depicted as complicit in his sorry state by the mere fact of taking a loan. In German, the word for debt, schuld, also is the word for sin. Americans similarly harbor a dim view of individual borrowers, even as it becomes almost impossible to attain a bourgeois adult life of getting a college degree, buying a house, and having a car without being in debt. So while we can hope that the Wells abuse will finally break the logjam and lead to punishment of senior executives, even then it’s more likely to be an isolated case than a start of a trend.
Wells Fargo Exec Who Oversaw Fake Accounts Received $125 Million Upon Recent Retirement, Praise from CEO; Senate Hearings Next Week [Yves Smith/Naked Capitalism]
(Image: Scarlet/University of Nebraska – Lincoln)