Wells Fargo employees feared for their jobs, consumer banking head says

After Mary Mack became Wells Fargo’s head of consumer banking in 2016, she embarked on a multi-city listening tour that featured small group meetings with an estimated 10,000-plus employees.

Mack encountered a workplace culture that was marked by fear, according to testimony she gave Friday in an administrative law case that the bank’s primary regulators have brought against three former Wells Fargo executives.

“What I observed in the market visits almost immediately is that people were afraid to raise their hand,” Mack said.

Employees worried that if they spoke out about misconduct they had witnessed, their managers would retaliate, and they would ultimately be fired, Mack testified.

Mack also said that she later learned employees in certain markets she visited were coached in advance of the meetings not to ask certain questions. “People would stand up, and they were fearful,” she said.

Mack’s testimony provided new insights about Wells Fargo’s fake-accounts scandal, which exploded into public view just weeks after she was named head of the bank’s retail banking unit.

In particular, Mack’s comments lent support to stories of retaliation told by numerous former Wells Fargo employees who blew the whistle on sales misconduct at the bank before 2017.

In April 2017, a committee of Wells Fargo’s board of directors responded to the retaliation allegations in a report that relied heavily on work done by the law firm Shearman & Sterling.

The report — which was billed as an independent examination of the scandal, but has since drawn criticism over an alleged conflict of interest — stated that Shearman & Sterling “has not identified a pattern of retaliation” against retail banking employees “who complained about sales pressure or practices.”

Later in 2017, Wells Fargo announced changes to its policies for handling internal ethics complaints. Mack, who remains the company’s CEO of consumer and small-business banking, elaborated on those changes during her testimony Friday.

For instance, the bank now conducts third-party reviews to look for evidence of retaliation in situations where employees who have made ethics complaints are fired or moved into a different role, she said.

Mack led Wells Fargo’s retail brokerage unit before she was named in 2016 to succeed Carrie Tolstedt as the head of consumer banking.

Mack was called to testify by the Office of the Comptroller of the Currency, which is seeking to recover a total of $18.5 million from former Wells Fargo Chief Auditor David Julian, onetime community banking executive Claudia Russ Anderson and former executive audit director Paul McLinko.

Last year, the OCC wrote in a filing that Mack might testify about the “fear” Tolstedt’s team had of their onetime boss. But Mack’s public testimony on Friday did not include comments specifically about Tolstedt. While the OCC has filed administrative charges in an effort to recover $25 million from Tolstedt, her conduct is not at issue in the ongoing hearing.

During her testimony Friday, Mack did speak about changes the $1.9 trillion-asset bank has made to the hiring practices inside its consumer banking division.

She said that Wells Fargo no longer looks to hire employees away from what she characterized as retailers that use more aggressive sales tactics. She mentioned mall stores and phone companies as examples of the kinds of employers that Wells no longer targets.

In addition, the San Francisco-based bank has changed the criteria for internal promotions in its consumer banking division, Mack said.

“The practice had been almost everybody in the community bank — not everybody, but almost — started as a teller. And the career pathing was that the teller who referred the most sales was promoted to a banker, the banker who referred the most promoted to a senior banker or a manager, the manager who referred the most, or whose branch sold the most, would be promoted to the district manager, and so on,” Mack said.

“And there wasn’t anything about whether they were the right leaders or coaches or developers of people. And my experience is such that oftentimes the best salesperson is not the best manager. And so we now have reoriented around leadership skills,” she said.

Although Wells Fargo’s regulatory troubles have persisted under CEO Charlie Scharf, who was hired in 2019, the bank did recently hit a milestone in laying to rest the unauthorized account scandal. Last month, the firm’s 2016 consent order with the Consumer Financial Protection Bureau over retail sales practices expired.

Still, Mack’s testimony made clear that the long-running fake-accounts scandal still lingers. She said that the bank’s efforts to provide compensation to customers who may have been harmed by sales misconduct between 2013 and 2016 have continued this year.

Wells Fargo has acknowledged that under its longstanding sales model, employees were pressured to sell large numbers of products to existing customers, often with little regard to whether the customers needed or wanted them, and that the bank opened millions of fraudulent or unauthorized accounts between 2002 and 2016. Wells ultimately paid $3 billion last year to settle a criminal investigation by the Department of Justice and Securities and Exchange Commission.

While the bank previously provided compensation to a narrower set of customers, more recent remediation efforts have focused on customers whose accounts were never funded and then were charged fees, Mack testified.

“And so we started with a fairly narrow definition of what that population might be,” she said. “We have since really broadened our aperture.”

The hearing, which began earlier this fall in South Dakota and has continued by videoconference, is expected to continue for more than another month.

The defendants’ lawyers have said the agency’s allegations — that the three former executives did not perform their duties adequately and that their failures contributed to systemic problems at the bank — are unfounded.

Wells Fargo said after the OCC filed the charges in 2020 that it did not have “the appropriate people, structure, processes, controls or culture” in place at the time “to prevent the inappropriate conduct.”