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Mr. Stumpf, Why Are You Still Here?

If you’re a Wells Fargo customer, employee or shareholder, this headline has to be THE question on your mind. . . Given Mr. Stumpf’s recent testimony before the Senate, it may be the only question for him. What we know for sure is that the massive Wells Fargo fraud/cover-up will continue.

Breaking News:

  1. The bad news and mistakes keep coming. Wells Fargo decides to end abusive sales practices this weekend, not wait until 2017.
  2. Amid scandal, Wells Fargo CEO to forfeit $41 million in pay and other penalties.
  3. Wells Fargo’s independent directors are planning compensation clawbacks of all kinds, some affecting senior executives who have retired, like Carrie Tolstedt.
  4. It’s hard to believe that John Stumpf is still running the place. Although, clearly he can’t be, he’s too busy defending himself.
  5. Speculations about Stumpf’s survivability continue to grow.
  6. Independent directors announce the launch of an internal investigation.
  7. In the absence of an independent outside investigating authority, the cover-up now moves directly into the Board of Directors.

Attempting to respond to the rush of recent news stories, customer complaints and ultimately to his Senate testimony, John Gerard Stumpf, Wells Fargo CEO, released a minimal, dismissive, almost mindless, customer message on September 14, 2016. The email, apparently sent only to a fraction of customers, is actually an explanation of the plan to cover up the extraordinary and massive crimes against their customers and shareholders. The letter fails to admit or disclose any serious issues, provides virtually no helpful information to understand the extent of their deceit and there is no disclosure, penitential thinking or contriteness. None.

Like his earlier email, Mr. Stumpf’s incoherent, uninformed, arrogant and clueless Senate testimony demonstrated that the bank has been largely leaderless throughout the nine years of his tenure. And yet, he managed to stumble, fumble and bungle into a $185 million fine involving literally millions of bogus customer transactions.

A Roadmap to the Cover-up/A Guide for Recovery and Rehabilitation

The following is an analysis of Mr. Stump’s email. The document sums up the few known ingredients of the cover-up, and there is likely more to be uncovered if a thorough investigation is undertaken.

Cover-up Element #1:

There is no real admission, only denials, of having knowingly caused harm to millions of customers.

He said: “Some Wells Fargo customers received products and services that they do not want or need.”

Well duh!

Some? We actually don’t know the number of affected customers and clearly Mr. Stumpf is shielding that information. The news accounts are piling up, documenting testimonies and data on the scope and extent of Wells Fargo’s fraudulent behaviors.

He should have said: Millions of Wells Fargo customers were cheated and exploited without their knowledge by thousands of Wells Fargo employees. They were forced to purchase unwanted and unneeded merchandise, products and services. Going forward, we will find and publicly disclose the extent of our misdeeds. We apologize for victimizing you and disrupting your lives.

Cover-up Element #2:

Stumpf denied direct responsibility for this extraordinary cultural failure and performance disaster, shifting the blame to lowly rogue employees. If he didn’t know what was going on, how does he know that they’re rogues?

He said: “Every day we strive to get things right. In this instance we did not – and that is simply not acceptable.”

Good grief!

This is a most extraordinary statement for someone who, at the Senate hearing, claimed full responsibility for a situation he ignored for at least three years, and still claims to be in the dark about most of it.

This certainly resembles an enterprise-wide criminal conspiracy to deceive and defraud millions of customers. Hundreds, even thousands, of supervisors had to be aware of what was going on, yet said and did nothing. To stop the fraudulent behavior, so far, according to press accounts, more than 5,300 Wells Fargo employees have been fired. Stumpf, in his effort to cover for his leadership buddies, told (lied to) the Wall Street Journal that “there was no incentive to do bad things,” when he had known and sanctioned the “do whatever it takes” culture in the retail division. Crimes and errors were hidden, ignored and minimized rather than reported, explained, disclosed and stopped. The wrongness of what transpired is likely to expand. This attitude of “high-fiving” unethical behaviors and humiliating honorable employees is very common in the financial industry.

He should have said: We intentionally fostered and encouraged an atmosphere of insidious and crime-inspiring, unethical behaviors, including:

  • Careless ethical enforcement and a completely failed compliance process
  • Lack of protocol for teaching, enforcing and disciplining when ethical breeches occurred
  • Structuring company goals and employee incentives in such a way that forced compromising ethical behavior
  • Taking integrity busting shortcuts
  • Dismissing or destroying the careers of employees who reported our outright wrong behavior, demeaning the internal or external credibility of those who tried to blow the whistle, those who reported or brought management’s attention to lapses in ethics and ethical behavior
  • A culture of deliberate, deceptive and fraudulent behavior
  • A management structure that clearly encouraged and rewarded those who operated beyond the rules and a lack of recognition for those who didn’t or complained; punished who did not comply
  • An enormous sense of internal arrogance that so many would say so little about such egregious unethical and perhaps illegal decisions, actions and expectations
  • A “do whatever it takes” mandate from top and senior management
  • A culture of silence and turning a blind eye from wrong doing

Cover-up Element #3:

No believable restitution, penance or significant punitive action meted out within the organization and its upper ranks.

He said: “So we’re making it right. The first step we’ve taken is to fully reimburse any customers who were affected by these actions. We have been making some changes to how we do business over the last several years to ensure we are always aligned with our customers’ interests. To that end, the second change is to ensure Team Members in our Retail Bank are compensated on what matters most: delivering great experiences and ensuring positive outcomes – not on product sales.”

To that end, the senior level manager in charge of these fraudulent activities, Carrie Tolstedt, was allowed to retire and received a payment of nearly $125 million (the proverbial “Golden Zipper” to really zip her lips tight). What does she know that’s worth so much money to buy her silence?

He should have said: We knew about it but did nothing until we were caught. Our behavior is reprehensible and we are working with independent experts to get our culture back under control. We will apologize through generous restitution as well as restoring ethical behaviors and business practices. Going forward:

  1. Customers will be compensated in proportion to their damage, suffering and pain by providing significant financial payments.
  2. Managers and supervisors who allowed the situations to continue will be replaced, and some prosecuted.
  3. A significant portion of employee compensation will be based on proven and validated ethical behavior.
  4. Intensive audits will be made of compensation, including the huge grant to Ms. Tolstedt.
  5. A team of outside consultants will work with employees and supervisors to reinstall tough new standards of conduct, enhanced ethics education modules and compliance in our company. They will impose tough, direct, measured and disclosed compliance programs where people are sanctioned, punished or fired when they break the rules.

Cover-up Element #4:

There is absolutely no indication of repentance, humility, or recognition of the unnecessary pain and suffering caused by the situation to so many millions of customers.

He said: “Your trust and confidence in us is something we hold near and dear. I know I speak for our community of 268,000 dedicated Team Members when I thank you for giving us the opportunity to continue serving…”

Let’s hope not. Let’s hope at least hundreds of these 268,000 will stand up and keep hammering, exposing and disclosing what is happening within this institution.

He should have said: I am profoundly and humbly ashamed and apologize to our community of 268,000 dedicated, ethical team members for allowing this situation to come to this point. Every single one of us has the obligation to speak up. Silence is the greatest protector and authorizer of unethical and illegal behavior. We have established a new reporting system that we hope will root out this cancer in our company. Going forward there will be:

  1. Earlier Detection: We have established a hotline which can be called anonymously. The calls that come in will be responded to within 24 hours.
  2. Anonymity: We have established a dashboard for review of these anonymous calls. Calls and a report of their findings will be posted to the dashboard with 72 hours.
  3. Special Protection: for whistleblowers.

Cover-up Element #5:

There is no direct request for public, customer or shareholder forgiveness from those whose lives have been so grievously interrupted in exchange for restitution and honorable, future behavior.

He said: “I thank you for giving us the opportunity to continue serving you and supporting your financial future.”

Those still serving should have been terminated as a condition of the settlement and new tough supervision of the corporation should be established by the Federal Courts.

He should have said: I have offered my immediate resignation to the Board of Directors. I recognize that the needed change in culture, behavior and leadership expectations within this organization will only happen under new, more vigilant and vigorous, leadership and supervision across the Wells Fargo organization.

Final Thoughts

Question: Why is John Stumpf still Chief Executive Officer of Wells Fargo?

Answer: To cover his tracks and protect his co-conspirators, including members of the Board of Directors, who sanctioned or turned a blind eye toward this cover-up.

There needs to be an extensive criminal investigation.

In order to discover and stop crime and begin dramatically changing the behavior and culture of a company, to one of honesty, openness and integrity with accountability, transparency and disclosure, top people need to go. The current Wells Fargo settlement, however, keeps the same perpetrating executives, who created or allowed this fiasco, in charge of cleaning it up and preventing more problems from happening.

Fat chance.

Congress needs to interrogate Wells Fargo’s Board of Directors to determine their knowledge of and participation in the fraudulent behavior. Anyone connected with this scandal should be terminated, if they haven’t’ been, forfeiting any pension benefits and other financial rewards they might have been entitled to. The major players, whether active or passive, in positions of high authority should be brought to justice.

It’s now time to say, “Goodbye, Mr. Stumpf.”


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