Wells Fargo fires former L.A. regional president, 3 other managers after scandal
Wells Fargo & Co. said Tuesday that it has fired four senior managers in the aftermath of the scandal over unauthorized accounts opened without customers’ knowledge or consent.
The executives were the first terminations disclosed by the banking giant since the high-profile resignation of former Chairman and Chief Executive John Stumpf in October amid mounting outrage and criticism from lawmakers.
The San Francisco banking giant said its board unanimously agreed to terminate Shelley Freeman, former Los Angeles regional president and later the head of consumer credit solutions; Pamela Conboy, Arizona lead regional president; Matthew Raphaelson, head of community bank strategy and initiatives; and Claudia Russ Anderson, former community bank chief risk officer.
“None of these executives will receive a bonus for 2016 and they will forfeit all of their unvested equity awards and vested outstanding options,” the company said in a news release.
Wells Fargo said its internal investigation was continuing and it plans to present its findings before its annual shareholders meeting in April.
In September, Wells Fargo agreed to a $185-million settlement with Los Angeles City Atty. Mike Feuer, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency after employees were found to have created as many as 2 million checking, savings and other accounts.
The tactics, blamed on onerous sales goals, were first uncovered by the Los Angeles Times in 2013. The bank has fired about 5,300 workers for improper sales practices dating back to 2011 but most of them were lower-level employees.
Before Tuesday’s announcement, the only other major Wells Fargo executive aside from Stumpf to publicly leave a job was Carrie Tolstedt, the former head of the Wells Fargo’s community banking unit that oversaw much of the improper sales activities.
Tolstedt left the bank in July — a departure that Stumpf acknowledged was motivated by the scandal — and was replaced by Mary Mack.
Tuesday’s statement did not detail the connections between the four fired executives and the unauthorized account openings, but the executives worked or oversaw parts of Wells Fargo’s business believed to be the most deeply involved in the unethical practices.
Freeman had been with Wells Fargo since 1996. She had been promoted to Wells’ head of consumer credit solutions in 2014, but earlier had served as president of the Los Angeles market, where much of the wrongdoing took place.
As the community bank’s chief risk officer, Anderson had been in charge of the committee that in theory might have raised the alarm sooner about any questionable or illegal behavior. Anderson has been on unpaid leave since mid-September, a spokeswoman for the bank said.
Arizona, which Conboy oversaw, was an area disproportionately affected by the sales practices scandal. She had been with the bank more than 37 years, according to her LinkedIn account.
Raphaelson had been with Wells since at least 2003, heading up strategy and initiatives at the bank.
None of the four former executives could be reached for comment.
The public terminations appear to be part of a strategy to win back customers’ trust. Stumpf was replaced by a longtime Wells Fargo insider, Tim Sloan, who vowed that the bank would aggressively investigate the scandal.
“My immediate and highest priority is to restore trust in Wells Fargo,” Sloan said at the time.
Nell Minow, vice chair of ValueEdge Advisors, which promotes strong corporate governance, called the firings “a welcome step in the right direction.”
“This announcement makes it clear they’re not sweeping things under the rug and are continuing to look at the systemic problems that led to this mess,” she said
Last month, Wells Fargo announced a new incentive system will no longer reward employees simply for opening accounts but will instead judge them on account use and whether customers are satisfied with the bank’s services.
The bank also has said it’s contacting each of its customers affected by the scandal, including those who were concerned that their credit scores were damaged by having accounts opened in their names.
Independent banking analyst Bert Ely said that getting such issues resolved “is much more significant to restoring the confidence of customers, particularly those customers directly affected,” than the firing of the managers.
He also said that while Wells Fargo gets credit for being transparent with the firings, “it keeps the bad news out there,” which affects customer confidence.
“It’s in the interest of the bank to get this behind them as quickly as possible,” Ely said.
The bank reported this month that 200,000 fewer checking accounts were opened in January than in the same month a year earlier, a drop of 31%, and that customer-initiated closures of checking accounts rose 4% over the same period.
In addition, new customer credit card applications plummeted 47% in January compared with the same month a year earlier, and customers initiated 200,000 fewer credit card applications on a year-to-year basis.
Reminders of the sales scandal are not likely to go away any time soon.
The bank remains under investigation by several state and federal agencies, including the California Department of Justice, the U.S. Department of Labor and the Securities and Exchange Commission.
And in December, state insurance regulators in California and New Jersey said they would probe the bank’s sales practices after former employees of Prudential insurance filed a lawsuit claiming that Wells Fargo workers pushed Prudential policies on customers who did not want them.
Besides the regulatory investigations, Wells Fargo faces a number of civil lawsuits brought by customers and former employees, with some past workers alleging that they might have been fired or demoted for refusing to open bogus accounts to meet the aggressive sales goals.
Wells Fargo last month also reported a 6% drop in fourth-quarter profit in the wake of the scandal, earnings that came in below Wall Street analysts’ expectations.
Wells Fargo’s stock, which had fallen following the September settlement, has recovered along with other financial industry stocks since the November presidential election. Its shares rose 16 cents on Tuesday to $58.25.
The Associated Press and Times staff writer Lauren Raab contributed to this report.
5:20 p.m. This article was updated with details about the bank’s new incentive system.
2:40 p.m.: This article was updated with additional details on the work history of the four terminated employees.
1:25 p.m. This article was updated with a closing stock price and comments from outside analysts.
11:35 a.m.: This article was updated with additional details on the scandal’s financial impact on Wells Fargo, its new CEO and other pending investigations.
This article was originally published at 10:50 a.m.