Wells Fargo Bank, N.A. has provided a written response to questions from a number of senators about the compensation of Senior Executive Carrie Tolstedt and whether the bank will use its "clawback" authority to recover compensation it has paid to senior executives. Tolstedt is the former Senior Executive Vice President of Community Banking who led the division responsible for conduct by Wells Fargo that led to enforcement actions against the bank by the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency (see Banking and Finance Law Daily, Sept. 8, 2016).
Letter to Wells Fargo. Tolstedt announced her retirement in July 2016, "and will walk away from the company with tens millions of dollars in compensation," according to Sens. Elizabeth Warren (D-Mass), Sherrod Brown (D-Ohio), Jack Reed (D-RI), Bob Menendez (D-NJ), and Jeff Merkley (D-Ore) who released the response to a letter written by the lawmakers to Wells Fargo (seeBanking and Finance Law Daily, Sept. 16, 2016). In their letter, the senators stated that Tolstedt received more than $20 million in annual bonuses between 2010 and 2015, time in which the misconduct occurred. The bonuses were justified by the company in certain instances because of the "strong cross-sell ratios" in her division.
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."
Wells Fargo response. The Wells Fargo response provides several new pieces of information, the senators said, and confirms that:
Wells Fargo's board and senior executives were aware of the misconduct in Tolstedt’s division at the time of her retirement announcement. According to the Wells Fargo response, "Senior management and the board were aware of the pending litigation, investigations, and discussions with our regulators relating to sales practices when Ms. Tolstedt indicated her decision to retire."
Despite the misconduct under her watch, Tolstedt has received tens of millions of dollars in compensation from Wells Fargo. According to the Wells Fargo response, "Ms. Tolstedt owns...shares of Wells Fargo stock that are currently worth approximately $43.6 million...vested, but unexercised stock options ...worth approximately $34.1 million...(and) unvested and unpaid equity awards...with a...value of approximately $18.9 million."
Tolstedt remains eligible for millions of dollars in additional incentive bonuses for 2016. Despite her July 2016 retirement, she was allowed to remain at Wells Fargo through the end of 2016, and according to the Wells Fargo response, "Ms. Tolstedt is eligible to be considered for a 2016 annual incentive award."
Wells Fargo can clawback all or part of Tolstedt's compensation, but has not committed to doing so. According to the letter, Wells Fargo’s board has the discretion to determine whether to cancel all or any portion of Tolstedt's unpaid restricted share rights or performance share awards "...it will assess the relevant facts and circumstances...to determine whether to cancel or clawback any incentive compensation."
"The Wells Fargo response raises as many questions as it answers. It remains unclear how and why Ms. Tolstedt will be allowed to walk away with millions of dollars in salary and bonuses from Wells Fargo despite the rampant misconduct that occurred under her watch," the senators said. The lawmakers added that they will have further questions on the issue.
Companies: Wells Fargo Bank, N.A.
MainStory: TopStory CFPB CrimesOffenses EnforcementActions OversightInvestigations
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