The U.S. Labor Department will re-examine six years worth of whistleblower cases against Wells Fargo (WFC) - Get Report amid a comprehensive review spurred by the creation of as 2 million bogus customer accounts by workers under pressure to meet sales goals or lose their jobs.
"I have directed enforcement agencies within the department to conduct a top-to-bottom review of cases, complaints or violations concerning Wells Fargo over the last several years," Labor Secretary Thomas Perez said in a Monday reply to U.S. Sen. Elizabeth Warren's request for a probe of the San Francisco-based bank's compliance with wage and hour laws. The department has also created a Web page with information about worker-protection laws for bank employees at www.dol.gov/wells fargo.
The Labor Department probe adds to mounting pressure on the San Francisco-based company, which gave up 11% of its market value this month after the Consumer Financial Protection Bureau announced a $185 million settlement over the accounts. Employees, customers and investors responded by suing the bank, one of the biggest in the U.S., and Congress summoned CEO John Stumpf to Washington, D.C., for hearings.
It was after the first of those, a contentious session with the Senate Banking Committee, that Warren, a Massachusetts Democrat, requested the Labor investigation. In a letter signed by seven other senators, she cited reports that employees, who made as little as $12 an hour, worked after-hours and on weekends trying to meet management's goal of selling as many as eight products to each customer, a strategy referred to as cross-selling.
"I'm glad the Department of Labor is initiating a prompt and thorough agency-wide review" to determine whether additional claims against the bank are warranted, Warren said in a statement Tuesday. "Every other federal agency with jurisdiction in this matter should follow the Labor Department's lead and promptly determine whether Wells Fargo and its senior executives should be prosecuted or otherwise sanctioned."
Since the settlement, Stumpf has pledged to end retail sales targets as of Jan. 1 and to expand the bank's checks for unauthorized accounts from California, where they were first reported, to the rest of the country.
"Management has announced multiple actions including changes to training, monitoring and controls, performance measures and sales incentives," Susan Roth Katzke, a Credit Suisse analyst, said in a note to clients last week. "Heightened political, legal and regulatory attention indicates that this may not be enough. What we don't know is where this ends, be it with additional settlements/fines and/or management changes."
While Wells Fargo fired 5,300 employees involved with the unauthorized accounts over a five-year period, Stumpf refused to commit to clawbacks of his own pay or that of consumer banking chief Carrie Tolstedt, who oversaw the cross-selling strategy. He did tell the Senate banking committee that he would support whatever decision the board of directors reached on the matter.
Stumpf earned $19.3 million last year, and Tolstedt is taking home as much as $125 million as she retires, the senators said.
The CEO, who was roundly criticized by senators for failing to discipline senior executives along with front-line workers, will likely face more questions on the matter Thursday in a hearing before the House Financial Services Committee.
The consumer bureau's probe "uncovered a workplace characterized by stringent sales quotas and aggressive incentives imposed on its employees, and staggering neglect by management of the obvious consequences to consumers," Warren and the other senators wrote in their letter to Labor Secretary Perez.
While Wells Fargo declined to comment on the Labor Department review, the bank has disputed the lawmakers' characterization of its management style. Wells Fargo, which has nearly 265,000 workers, has won the Gallup Great Workplace award for three years in a row and offers employees competitive pay and benefits as well as career-development opportunities, Jennifer Dunn, a spokeswoman, said in an e-mail last week.