By Emily Glazer
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,
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, were
demoted.
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, Ms. Lee, 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 demoting 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.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
March 09, 2017 08:20 ET (13:20 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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