September 16, 2016

Senators Ask if Wells Fargo Will Use Clawback Provisions to Recover Bonuses from Senior Executives, Including Carrie Tolstedt, Following CFPB Settlement for Employee Misconduct

Letter Requests Information from CEO and Chairman of the Board in Advance of Banking Committee Hearing on Tuesday

Text of the letter available here (PDF)

Washington, DC - United States Senator Elizabeth Warren (D-Mass.), along with Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) and Senators Jack Reed (D-R.I.), Bob Menendez (D-N.J.), and Jeff Merkley (D-Ore.), today sent a letter to Wells Fargo Chairman and CEO John G. Stumpf asking whether the bank will use its clawback authority to recover compensation it has paid to senior executives, including to former Senior Executive Vice President of Community Banking Carrie Tolstedt. The senators' letter comes in the wake of the Consumer Financial Protection Bureau's (CFPB) recent $185 million settlement with Wells Fargo, and the company's related decision to fire over 5,000 employees for creating more than 2 million checking and credit card accounts that may not have been authorized by customers.

The senators noted that Tolstedt, who led the Community Banking division through the time in which the misconduct occurred, received more than $20 million in annual bonuses between 2010 and 2015 - bonuses justified by the company in certain instances because of the "strong cross-sell ratios" in her division. As the senators explain, "That is a direct reference to the extraordinary number of accounts created by her division, many of which were never authorized by customers." The senators also noted that Tolstedt retired in July - just two months before the settlement was announced - with a retirement package worth up to $125 million.

The letter details the clawback provisions Wells Fargo implemented following the 2008 financial crisis, which were "designed to prevent exactly what happened with Ms. Toldstedt: shareholders and consumers bearing the burden of bank misconduct while senior executives walk away with multi-million dollar awards based on what the company later finds out are fraudulent practices."

After identifying the multiple grounds on which it appears Wells Fargo's clawback policy may be triggered, the senators asked a series of questions about how it will apply this policy in light of the CFPB settlement. The letter requests a response in advance of the Senate Banking Committee hearing next Tuesday, September 20th.

A PDF copy of the letter is available here.