Wells Fargo knew about sham accounts in 2002: report

Wells Fargo was aware its aggressive sales goals were problematic as far back as 2002 - more than a decade before the bank admitted that its employees had created at least two million sham accounts to meet them - according to a new 113-page report released Monday by its independent board members.

The bank's former chief executive, John Stumpf, was notified of a problem at one of the bank's Colorado branches in 2002 that led to 'mass termination” of bank employees, according to the report. Additional 'mass terminations” continued sporadically over the next decade until Wells Fargo was fined $185 million by regulators last year.

The report was the culmination of a six-month investigation by the bank's independent board members and comes as Wells Fargo struggles to move beyond the sales scandal. It indicates that the problems at Wells Fargo went on for far longer than originally acknowledged and likely involved more employees and customers.

The board said it was not aware of the scope of the problem - that about 5,300 employees had been dismissed for creating sham accounts - until the September 2016 settlements with authorities.

The roots of the problem, the report said, was the autonomy given to Wells Fargo's community banking division and the apathy of senior executives who played down the problems. The executives tended to view the sales abuses as largely 'minor infractions and victimless crimes” committed by a relatively few bad apples, and clung to a sales culture that had helped the bank grow so large.

'The Community Bank identified itself as a sales organization, like department or retail stores, rather than a service-oriented financial institution. This provided justification for a relentless focus on sales, abbreviated training and high employee turnover,” the report said.

Stumpf and former retail bank leader Carrie Tolstedt will forfeit more of their pay in the wake of the investigation. In addition to the $41 million Stumpf already has given up, the board decided last week to 'claw back” an additional $28 million of incentive compensation.

Tolstedt is losing stock options worth about $47.3 million in addition to the $19 million she already gave up, the report said.

Wells Fargo has been in lawmakers' crosshairs since acknowledging last year that some of its employees created as many as two million fake accounts - from credit cards to checking accounts - to meet sales goals. In some cases, Wells Fargo customers faced various fees for accounts they did not request, or bank employees took money from an authorized account to create a fake one.

The San Francisco-based bank fired 5,300 employees between 2011 and 2016 for the scheme, including some branch managers. But Monday's report indicates that additional employees were fired for similar activity years earlier.

In addition to the investigation led by the bank's independent board members, Wells Fargo also is being investigated by several regulators. Federal prosecutors are considering criminal or civil charges against the company, the U.S. Labor Department is investigating whether it illegally fired employees who reported the wrongdoing, and several cities and states have stopped doing business with the bank for now.

The House Financial Services Committee also is reviewing thousands of pages of documents turned over by Wells Fargo.