After Mary Mack became Wells Fargo’s Head of Personal Banking Services in 2016, she embarked on a multi-city listening tour that included small group meetings with around 10,000+ employees.
Mack has encountered a work culture marked by fear, according to testimony she gave on Friday in an administrative law case the bank’s top regulators brought against three former Wells Fargo executives.
“What I observed almost immediately when visiting the market was that people were afraid to raise their hands,” Mack said.
Employees feared that if they spoke out about the misconduct they had witnessed, their managers would fight back and end up being fired, Mack said.
Mack also said she later learned that employees in some markets she visited had been mentored before meetings not to ask certain questions. “People were getting up and they were scared,” she said.
Mack’s testimony provided new insight into the Wells Fargo fake accounts scandal, which exploded in public view just weeks after his appointment as head of the bank’s retail banking unit.
In particular, Mack’s comments supported stories of reprisals told by many former Wells Fargo employees who spoke out against the bank’s malpractice prior to 2017.
In April 2017, a committee of the Wells Fargo board responded to allegations of retaliation in a report which relied heavily on the work of the law firm Shearman & Sterling.
The report – which was billed as an independent review of the scandal, but has since drawn criticism on a suspected conflict of interest – stated that Shearman & Sterling “did not identify any pattern of retaliation” against retail bank employees “who complained about pressure or business practices”.
Later in 2017, Wells Fargo changes announced its internal ethics complaints handling policies. Mack, who remains CEO of the personal and small business banking company, explained the changes during his testimony on Friday.
For example, the bank now conducts third-party reviews to look for evidence of retaliation in situations where employees who have filed ethics complaints are fired or transferred to a different role, she said. .
Mack led the Wells Fargo retail brokerage unit before being appointed in 2016 to succeed Carrie Tolstedt as head of consumer banking.
Mack was called to testify by the Office of the Comptroller of the Currency, which seeks to recover a total of $ 18.5 million former Wells Fargo chief auditor David Julian; former community bank executive Claudia Russ Anderson; and former chief audit executive Paul McLinko.
Last year, the OCC wrote in a filing that Mack could testify about the “fear” Tolstedt’s team had their old boss. But Mack’s public testimony on Friday did not include comments specifically on Tolstedt. Although the OCC has filed administrative charges in an attempt to recover $ 25 million from Tolstedt, his conduct is not in issue in the current hearing.
During his testimony on Friday, Mack spoke about the changes the $ 1.9 trillion asset bank made to hiring practices within its consumer banking division.
She said Wells Fargo is no longer looking to hire employees away from what it has called retailers who use more aggressive sales tactics. She mentioned shopping malls and telephone companies as examples of the kind of employers 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 that almost everyone in the community bank – not everyone, but almost – started out as a cashier. And the career path was that the cashier who referred the most sales was promoted to a banker, the banker who referred the most to a senior banker or manager, the manager who referred the most, or whose branch sold the most, would be promoted to district manager, and so on, ”Mack said.
“And there was nothing about whether they were the right leaders or coaches or developers of people. And my experience is such that often the best salesperson is not the best manager. And we have now reoriented ourselves around leadership skills, ”she said.
Although Wells Fargo’s regulatory problems persisted Under the leadership of CEO Charlie Scharf, who was hired in 2019, the bank recently took a big step forward in ending the unauthorized accounts scandal. Last month, the company’s 2016 consent order with the Consumer Financial Protection Bureau regarding retail practices expired.
Yet Mack’s testimony made it clear that the long-standing fake accounts scandal persists. She said the bank’s efforts to compensate customers who may have been harmed by malpractices between 2013 and 2016 continued this year.
Wells Fargo recognized that as part of its long-standing sales model, employees were forced to sell large numbers of products to existing customers, often without worrying about whether 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 the Securities and Exchange Commission.
While the bank previously offered compensation to a smaller set of customers, more recent remediation efforts have focused on customers whose accounts were never funded and were subsequently billed, Mack said.
“And so we started with a pretty narrow definition of what that population could be,” she said. “Since then, we have really broadened our openness. “
The hearing, which began earlier this fall in South Dakota and continued via video conference, is expected to continue for more than a month.
Lawyers for the defendants said the agency’s claims – that the three former executives failed to perform their duties adequately and that their failures contributed to the bank’s systemic problems – 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 conduct inappropriate ”.