Alex Polonsky was watching Senator Elizabeth Warren of Massachusetts lay into Wells Fargo’s chief executive, John Stumpf, on 20 September when he finally had enough.
He picked up the phone and called Jonathan Delshad, who would soon become his lawyer. Polonsky used to work for Wells Fargo, but according to his lawsuit, he was demoted and later terminated for not meeting his sales quotas.
The bank has recently come under scrutiny for such quotas after it was revealed that for years, thousands of its employees had been opening unauthorized accounts in order to meet them.
More than 2m such accounts were opened without customers’ permission and more than 5,300 Wells Fargo employees have been fired – with about 1,000 being dismissed each year over the past five years.
At the same time, employees like Polonsky were fired for not meeting their quotas.
“He was like: I got fired because I would not engage in this kind of behavior. They pushed me to meet my quotas, meet my quotas, and I kept telling them: what you are asking me to do is open accounts for people that do not want them.
You are asking me to do stuff that does not make sense,” said Delshad, Polonsky’s lawyer, recalling their phone conversation. “When he called me asking for representation, I said, ‘I am sure you are not the only one out there.’ We got another class action named client [Brian] Zaghi and filed the class action lawsuit.”
The bank has apologized for the unauthorized accounts and recently announced a $185m settlement with US regulators. Stumpf has taken a hot seat before the US Senate and House of Representatives. Yet the bank’s troubles are just beginning.
In addition to Polonsky’s lawsuit on behalf of employees fired for not meeting quotas, other lawsuits by shareholders, investors and customers were filed in September.
The Department of Labor is investigating the bank for possible retaliation against whistleblowers – employees who called an ethics line regarding the unauthorized accounts and were later fired.
Reputation experts have been tripping over themselves in an effort to comment on the situation even as Democrats and Republicans have united in their outrage over the bank’s practices. Democrats have once again begun beating the drum on breaking up big banks, claiming that Wells Fargo is too large to manage, given that the practice of opening unauthorized accounts has gone on for years.
In the speech that captured Polonsky’s attention, Warren called on Stumpf to resign, return the money he “took while this scam was going on” and submit to investigation by the Department of Justice and the Securities and Exchange Commission. At the same hearing, Stumpf noted that his salary for 2015 was $19.3m.
Days after the hearing, Stumpf suggested to the Wells Fargo compensation board that they claw back his pay. And they did – asking him to forfeit his salary while the board launches another investigation into the bank’s sales practices, going back to 2009.
Stumpf was also asked to forfeit $41m worth of unvested equity awards.
Carrie Tolstedt, who oversaw retail banking at Wells Fargo during the time when the accounts were created, also forfeited $19m in such awards and will receive no severance after retiring this summer. She is still likely to walk away with about $77m.
Warren called these clawbacks in pay a “small step in the right direction”.
“Wells Fargo employees who failed to meet management’s outrageous sales goals were fired. Wells Fargo employees who tried to sound the alarm about the creation of fake accounts were fired.
Their lives turned upside down,” she tweeted the day after the board’s announcement. “Stumpf will be just fine: he keeps his job and most of the money he made while massive fraud went on under his nose.”
As of this weekend, the bank has terminated its sales quotas. Yet that does little to appease former employees who were fired for not meeting them in the past.
Wells Fargo told the Guardian it did not have a number for how many employees were fired for not meeting their quotas. As for Polonsky’s lawsuit, the bank is not going down without a fight.
“We disagree with the allegations in the complaint and will vigorously defend against the misrepresentations it contains about Wells Fargo and all of the Wells Fargo team members whose careers have been built on doing the right thing by our customers every day,” a Wells Fargo spokeswoman told the Guardian.
To Delshad, that kind of response is “sad” – after all, these were employees who “withheld from doing illegal practices” to meet their quotas.
“Whereas the average bank had three products per customer, Wells Fargo had six, and was not happy with that.
They pushed for a goal of eight per customer. To reach this goal, Wells Fargo placed knowingly unrealistic and impossible cross sell quotas on their bankers,” the lawsuit filed on behalf of Polonsky and Zaghi claims.
Wells Fargo “never had a target of eight” products per customer, Stumpf told US lawmakers on Thursday.
The number was meant to be “aspirational” and provide a framework for the employees as to what to strive for when sitting down with customers. The quotas were “misunderstood” and used by some former employees to break ethics codes, said Stumpf.
Was it stealing when they moved money from one account to another without permission? In some cases, yes, Stumpf noted, reluctantly.
It has been over three weeks since the $185m settlement was announced and the bank’s illegal sales practices came into the spotlight. The bank continues to insist that the unauthorized accounts were not part of an “orchestrated effort”.
Scapegoating of employees could be what hurts the bank the most, according to Matt Moscardi, head of financial sector research at MSCI.
Blaming former employees and having previously fired those who did not meet quotas could lead to a significant drop in productivity – which would translate into a drop in revenue.
“Customers are less likely to move. What’s likely to move is employees and that’s a big problem,” said Moscardi.
Wells Fargo’s retail customers are less likely to swap banks over the scandal than big corporate clients who might be concerned about their reputation.
However, Wells Fargo suffered a blow this week when the California state treasurer announced it was cutting its ties with the bank for the next 12 months.
Whether that will be enough of an incentive for change remains to be seen. As for Stumpf, he said California had been Wells Fargo’s home for 64 years and the bank was doing its best to regain its customers’ trust.
“I am now giving all of my energy to leading this company,” Stumpf said on Thursday, trying to reassure the US lawmakers. “I love this company. I spend all of my waking hours thinking of this company.”