The “sandbagging” scandal, which will long harm Wells Fargo’s reputation, recently entered another phase with the announcement that two employees will enter into a class-action lawsuit against the bank. Other lawsuits could bring the amount litigated to over $7 billion.
Alexander Polonsky and Brian Zaghi say they were fired for not meeting sales quotas, after a scandal involving millions of fake accounts resulted in nearly $200 million in fines for the bank. The two employees filed the lawsuit at a Los Angeles Superior Court and will be represented by LA attorney Jonathan J. Delshad. Delshad accuses Wells Fargo of firing employees who were forced to meet “unrealistic quotas” that in turn inspired thousands of their peers to open fake accounts, which were unknown to many customers, out of fear that they would lose their jobs.
The fallout from this scandal has savaged the reputation of Wells Fargo, which emerged almost unscathed from the financial crisis that almost brought the U.S. economy to its knees almost a decade ago. The outrage reached its loudest crescendo last week when the Wells Fargo’s CEO, John Stumpf, was subjected to a long and sustained verbal attack at a U.S. Senate hearing by Massachusetts Democrat Elizabeth Warren.
“You haven’t resigned, you haven’t returned a single nickel of your personal earnings,” jabbed Warren during Stumf’s testimony last week. “You haven’t fired a single senior executive; instead, evidently, your definition of ‘accountable’ is to push the the blame to your low level employees who don’t have the money for a fancy PR firm to defend themselves.”
Warren accused Stumpf of “gutless leadership” and described his actions as throwing over 5,000 Wells Fargo employees, many of whom made around $12 an hour, under the bus. Meanwhile the bank’s former head of consumer banking operations, Carrie Tolstedt, was able to collect almost $125 million as part of her sudden retirement package. The senator also criticized Stumpf’s description of the bank’s shenanigans as the work of a few “rogue” employees, noting that Wells Fargo’s aggressive sales tactics helped fuel the company’s continued rise of its stock price – which in turn allowed the bank’s chief to profit handsomely during his tenure of one of the world’s largest banks.
The bank’s senior leadership has continuted to endure even more embarrassing news, as in revelations that some employees who called Wells Fargo’s ethics hotline over the company’s hyper-aggressive sales quotas and tactics were fired for those actions. One branch manager in New Jersey claimed after he called that number, he was dismissed because of “tardiness.”
Class action lawsuits often take years before a ruling is made, and the Los Angeles litigation will most likely spur other employees and lawyers to follow suit. But the outrage over Wells Fargo’s punishment of employees for reacting to a toxic environment, which the evidence suggests executives have created, led the bank to take action many analysts wish had happened during the 2008-2009 financial meltdown. Wells Fargo recently announced that it is investigating its retail banking practices, and that in a widely publicized “clawback,” Stumpf will forfeit as much as $41 million in unvested stock, salary and bonuses.
Despite that news, Warren has not let up, with her latest Twitter onslaught including a retort that Stumpf will be “just fine.” The financial penalty Stumpf will pay may be a small step and falls short of real accountability, but this is a definite turnaround from the banking sector’s 2008 collapse, after which the perpetrators walked away unscathed and unpunished.
Image credit: Alexius Horatius/Wiki Commons