Wells Fargo Sued Over Firings for Missed Account Quotas
September 23, 2016 — 6:11 PM EDT
- Bankers say company knew quotas fueled ‘unethical behaviors’
- CEO Stumpf accused by employees of orchestrating sales scheme
The lawsuit offers details of how low-level bankers were allegedly pushed to create at least 10 new accounts a day in a sales initiative that has blown up into a scandal and prompted U.S. lawmakers to call for Chief Executive Officer John Stumpf’s resignation. Bankers were “coached” to secretly open fee-generating accounts and often resorted to using false customer contact information like NoName@WellsFargo.com on accounts so they couldn’t be traced back, according to the complaint.
The bank, according to the Los Angeles suit, rewarded employees with promotions for using tactics including “sandbagging” -- opening fake accounts the day after a customer instructed the bank not to; “pinning” -- assigning personal identification numbers without customer authorization; and “bundling” -- lying to customers about limited availability of certain products in packages.
While Wells Fargo fired 5,300 employees that it blamed for opening accounts without client approval, the bankers who sued Thursday said the dishonest practices were orchestrated by Stumpf.
“Wells Fargo knew that their unreasonable quotas were driving these unethical behaviors that were used to fraudulently increase their stock price and benefit the CEO at the expense of the low-level employees,” the bankers alleged in state court. “Although this policy was known to top executives of defendants, plaintiffs, as bankers, were blamed for harm to clients and retaliated against."
Authorities including the U.S. Consumer Financial Protection Bureau fined Wells Fargo $185 million on Sept. 8 for potentially opening about 2 million deposit and credit-card accounts without authorization. This week, Senate Banking Committee members including Democrat Elizabeth Warren urged Stumpf to return compensation and resign.
Wells Fargo hired a law firm to advise the board on potential pay clawbacks as the bank grapples with fallout from the scandal, the Wall Street Journal reported Friday. Robert Mundheim, a lawyer with Shearman & Sterling LLP in New York, was retained to help the board determine whether to claw back compensation from Stumpf, Chief Operating Officer Tim Sloan and Carrie Tolstedt, the former head of community banking, the newspaper said, citing a person familiar with the matter.
Oscar Suris, a spokesman at Wells Fargo, declined to comment on the claims made in suit or the reported hiring of Shearman & Sterling.
The bank has also been sued by customers and investors.
Employees were instructed by management to lie to customers by telling that each checking account automatically came with a savings, credit card or other type of account, according to the complaint.
Sales at each bank and for each employee were reported to district managers four times a day and discussed by them, according to the complaint. Employees who failed to meet daily sales goals were approached by management and often reprimanded. The plaintiffs said some workers were told by managers to “do whatever it takes" to meet the quotas.
The bankers who sued, Alexander Polonsky and Brian Zaghi, are seeking class-action status on behalf of other Wells employees in California who were fired or demoted during the past 10 years and are asking for at least $2.6 billion in damages. The suit includes claims of wrongful termination, retaliation, unlawful business practices and failure to pay wages.
Bank managers often handed employees blank account forms with an unknown signature at the bottom and the bankers were expected to fill out the forms, adding as many accounts as they needed to meet their quotas, Jonathan Delshad, the plaintiffs’ attorney, said in the complaint.
“It could have been a customer’s signature, it could have been their manager’s -- they had no way of knowing," Delshad said in an interview. “One of those customers was an exchange student making $300 a week who had four accounts, including two with negative balances."
Delshad said his clients are no longer Wells Fargo employees and that one is now a real estate agent. A LinkedIn profile for Zaghi shows him working for Marcus & Millchap in commercial real estate in the Los Angeles area.
The case is Polonsky v. Wells Fargo Bank & Co., BC634475, California Superior Court, Los Angeles County (Los Angeles).