By Emily Glazer 

Wells Fargo & Co. said Tuesday it had fired four executives in its embattled retail-banking operation, the first terminations of senior managers since a sales-practices scandal erupted last fall.

While an internal board investigation into the scandal continues, Wells Fargo said the inquiry should be completed by the bank's annual meeting in April. "Any additional actions will be made public by that time," the bank said.

Wells Fargo's board has already discussed eliminating 2016 bonuses for some top executives, such as Chief Executive Timothy Sloan and Chief Financial Officer John Shrewsberry, The Wall Street Journal has previously reported.

Those fired Tuesday were a few levels below the bank's highest echelons but were senior within the retail-banking business. They were: former retail-banking Chief Risk Officer Claudia Russ Anderson; Arizona retail-banking executive Pamela Conboy; consumer-credit executive Shelley Freeman, who was also a former Los Angeles retail-banking executive; and retail-banking strategy and finance executive Matthew Raphaelson.

The executives won't receive a 2016 bonus and will forfeit unvested equity and vested outstanding options, the bank said, adding that they were terminated with cause. The executives either declined to comment or didn't respond to requests for comment.

Before these terminations, Wells Fargo had said that it fired 5,300 staff for improper conduct related to sales practices over a five-year period. But in contentious Capitol Hill hearings last fall, former Chief Executive John Stumpf declined to name high-level executives who had also been disciplined.

Those hearings were prompted by Wells Fargo's agreement in September to a $185 million fine and enforcement action related to sales practices that included employees opening as many as 2.1 million accounts without customers' knowledge. The ensuing public uproar tarnished the bank's once stellar reputation, subjected it to a bevy of state and federal investigations, including by the Justice Department, and led to the departure of Mr. Stumpf.

The bank's board last fall clawed back tens of millions of dollars in equity compensation from Mr. Stumpf and former retail-banking head Carrie Tolstedt. But neither was fired. Mr. Stumpf abruptly retired in October, while Ms. Tolstedt left the bank in the fall after being told in the summer that she would be allowed to retire.

Within Wells Fargo, employees expressed satisfaction that the bank appeared to now be calling higher-level staff to task."No one who was directly managing this has been held accountable except for lower-level team members," said a current retail-banking executive.

Internally, some of the fired executives were connected in employees' minds with some of the practices that were central to the scandal.

Ms. Freeman, for example, was said to be a driving force between a January sales push known as "Jump into January." Former and current employees have told the Journal that the event, pioneered by Ms. Tolstedt, set lofty goals that led some staff to engage in improper behavior.

During the event, midlevel managers on the 43rd floor of the Wells Fargo Center in Los Angeles had to "run the gantlet," current and former employees said. This involved regional managers yelling out the number of products or services their branches sold on an almost hourly basis.

If a region did well during certain years, its employees could receive bobbleheads with the face of Ms. Freeman, who was then-Los Angeles retail banking chief. She also doled out $100 gift cards to stores like Chevron and Target and held rallies in downtown Los Angeles to drum up support, sometimes pitting California regions against each other, employees said.

Wells Fargo in October eliminated sales goals for retail-bank employees and this year the "Jump into January" event apparently wasn't held. At the same time, new retail-bank chief Mary Mack has been rolling out a new compensation plan for retail staff.

A poorly designed incentive compensation system was also to blame for much of the improper sales practices, former and current employees said. Staff who hit certain sales goals would earn bonuses ranging from around $500 to $2,000 a quarter for branch employees and as much as roughly $10,000 to $20,000 annually for district managers, according to employees.

One of the designers of the compensation system was another of the executives fired Tuesday, Mr. Raphaelson, current and former employees said.

In regional leadership meetings in 2012 and 2013, Mr. Raphaelson and his direct report, Jason MacDuff, starred in a "Back to the Future" skit to explain the sales plan, according to people who attended.With smoke machines, spotlights and a big picture of the "Back to the Future" car behind then, Mr. Raphaelson donned boots, a white scientist jacket and goggles as Doc Brown, and Mr. MacDuff sported jeans, Nike sneakers and a hat as Marty McFly. The two executives used an analogy around the movie's time travel machine -- referencing the flux capacitor and Mr. Fusion Engine -- to explain the "gearing" of the bank's "sales engine." Some executives present said they saw it as an attempt to validate the growth in the bank's sales goals from one year to the next. A spokeswoman declined to comment on Mr. MacDuff's behalf.

Of the two other fired executives, Ms. Conboy led retail banking in Arizona, one area The Wall Street Journal reported was particularly affected by the bank's push to sell as many products as possible to customers. The other, Ms. Russ Anderson, spearheaded a task force within the retail-banking unit in 2012 that was assembled to look for suspicious patterns in sales practices and examine areas of the U.S. where customer complaints were prevalent, such as Southern California, The Wall Street Journal reported in September. The bank had said that she went on leave soon after the scandal erupted in September.

Write to Emily Glazer at emily.glazer@wsj.com

 

(END) Dow Jones Newswires

February 21, 2017 17:44 ET (22:44 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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