Published March 10, 2017
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Wells Fargo & Co. took further steps this week to restructure its retail-banking business, even as the firm continues digging into the causes of its sales-practices scandal, according to employees and memos reviewed by The Wall Street Journal.
Some senior executives within the retail bank were demoted or had their responsibilities curtailed, according to one memo sent to employees Tuesday. This followed the firing in recent weeks of other executives as Wells Fargo continues to address the scandal that erupted last fall after it emerged that employees opened as many as 2.1 million accounts without customers’ knowledge.
Mary Mack, who took over the embattled retail-banking unit in July, wrote in a memo Tuesday that she was reorganizing groups within the business to expand its focus on roughly 6,000 branches across the U.S. The retail bank oversees about 78,000 employees and serves around 40 million retail-banking customers.
Ms. Mack wrote in the memo, reviewed by the Journal, that while the bank has taken a number of steps to rebuild trust with customers and employees, there is still more work to do. That includes “changes in leadership and how our organization is structured,” she wrote.
Wells Fargo sent a separate memo Tuesday to some employees alerting them that an independent consulting firm likely will contact several hundred employees about the sales-practices issues, according to the memo reviewed by the Journal.
The consulting firm is reviewing the bank’s controls around sales practices to try to determine the root cause of the issues. The bank is having this done as part of the regulatory consent orders it entered into in September.
Meanwhile, the bank’s board is continuing its own investigation into the scandal. It will share results before Wells Fargo’s annual shareholder meeting April 25.
In recent weeks, Ms. Mack has met with senior retail-banking executives and hinted at changes to the business that were detailed in Tuesday’s memo, according to people who attended them. As part of these, two of the retail unit’s top three employees, who were also lieutenants to former retail-bank head Carrie Tolstedt, had their roles diminished.
Ms. Tolstedt retired in July; the bank’s board subsequently clawed back some of her long-term compensation.
Among the affected executives, Lisa Stevens will continue leading the retail bank’s western region, which ranges from California to Iowa, but no longer will oversee small-business banking. She will continue to report to Ms. Mack.
Before the scandal, many bank employees said they believed Ms. Stevens was in line to become head of retail banking. Chief Executive Timothy Sloan is one of her mentors, and executives said the two sometimes worked out together at employee events in Pasadena, Calif., near where they both live.
John Sotoodeh, who took charge of the bank’s troubled Los Angeles region in 2009, also was demoted. He now will oversee a region a fraction of the size of his prior role, which had included Texas, according to the memo. As a result, employees directly reporting to him will fall to an estimated 7,000 from 15,000 previously. Mr. Sotoodeh, who previously reported to Ms. Mack, now will report to Ms. Stevens.
Mr. Sotoodeh was known within the bank for aggressively pushing sales, especially during Wells Fargo’s “Jump into January” promotional event each year, and for promoting lofty goals that employees had to hit. Former employees have said that these goals prompted them to create fake accounts. Wells Fargo fired 5,300 employees over a five-year period for such behavior.
Mr. Sotoodeh was also one of a group of top retail-bank executives who were warned about possible sales-practices issues as early as 2012. Former head of deposit products Ken Zimmerman, who reported to Ms. Tolstedt, wrote an email in June of that year to a number of retail-banking executives, including Mr. Sotoodeh, Ms. Stevens, Shelley Freeman and Claudia Russ Anderson. The latter two were fired by the bank a few weeks ago.
The email cautioned about customers getting multiple checking accounts on the same day, an issue Wells Fargo had been looking into. “This is something to keep an eye on,” wrote Mr. Zimmerman, who took a leave of absence in early 2016 and left the company in July, according to a copy of the email reviewed by the Journal. “The regional variation suggests bankers are likely driving some of this behavior” and Wells Fargo may risk a “customer perception that their money isn’t safe.”
The current and former executives didn’t respond to requests for comment.
Besides changing the roles of Ms. Stevens and Mr. Sotoodeh, Ms. Mack plans to name three executives to oversee new groups: one focusing on small business and the “affluent,” another on customer and branch experience, and a third on business strategy and administration, according to her memo.
Earlier this week, the Journal reported that the bank also fired three retail-banking managers who led large regions in California and Arizona, around one level below the four executives who were earlier fired.
Re-disseminated by The Asian Banker from The Wall Street Journal