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 accounts opened in customers’ names without their knowledge or consent.The banking giant said its board agreed unanimously to terminate...

BUSINESS
22 February 2017 Wednesday 01:16

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 accounts opened in customers’ names without their knowledge or consent.

The banking giant said its board agreed unanimously to terminate Shelley Freeman, former Los Angeles regional president and current 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 San Francisco company said.

Wells Fargo said its board was still investigating the situation and plans to present its findings before its annual shareholders meeting in April.

The statement did not detail the connections between the four fired executives and the scandal, in which Wells Fargo employees were found to have created as many as 2 million accounts — such as new credit card accounts — in customers’ names, using tactics that were first uncovered by the Los Angeles Times in 2013.

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 to end investigations into the unauthorized accounts.

After Wells Fargo & Co. Chief Executive and Chairman John Stumpf was grilled by members of the Senate Banking Committee last week, regulators took the stand to answer senators’ questions about their investigation into the bank’s sales practices.

But one key figure was missing from the action: Los...

The bank also said it had fired about 5,300 workers for improper sales practices dating back to 2011.

But as criticism from lawmakers and others continued to mount over senior executives’ oversight when the improper sales practices occurred, John Stumpf resigned as chairman and chief executive of the company in October.

The board then replaced Stumpf with 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.

The bank 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 that they didn’t request.

Independent banking analyst Bert Ely said that getting each of those 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” and that affects customer confidence. “It’s in the interest of the bank to get this behind them as quickly as possible,” Ely said.

But Nell Minow, vice chair of ValueEdge Advisors, which promotes strong corporate governance, said Wells Fargo’s firing of the managers “was 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.

The bank remains under investigation by a handful of 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 insurer Prudential filed a lawsuit claiming that Wells Fargo workers pushed Prudential policies on customers who did not want them.

Wells Fargo’s operations also have suffered from the scandal.

The bank has said 200,000 fewer checking accounts were opened in January than in the same month a year earlier, a drop of 31%, and 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.

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.

Before Tuesday’s announcement, the two major Wells Fargo executives to publicly leave their jobs were Stumpf and 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 Stumpf acknowledged was motivated by the scandal – and was replaced by Mary Mack.

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.

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 to any questionable or illegal behavior.

Conboy worked for Wells Fargo for more than 37 years, according to her LinkedIn profile. Raphaelson had been with Wells since at least 2003, heading up strategy and initiatives at the bank.

Besides the regulatory investigations, Wells Fargo faces a number of civil lawsuits brought by customers and former employees, with some past workers alleging they might have been fired or demoted for refusing to open bogus accounts to meet the aggressive sales goals at the heart of the scandal.

Wells Fargo’s stock had fallen more than 10% in the weeks following the September settlement, but has recovered along with other financial industry stocks since the November presidential election.

They are now trading above their pre-scandal high and closed up 16 cents on Tuesday to $58.25 a share.

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The Associated Press and Times staff writer Lauren Raab contributed to this report.

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UPDATES:

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.

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