LOS ANGELES _ In a long-anticipated report released Monday, Wells Fargo & Co. pinned the blame for its unauthorized-accounts scandal on weak corporate oversight, an unwatchful former CEO and the executive who led the bank's community banking division.
The San Francisco bank also said it would take back more than $47 million in pay from the former community banking executive, Carrie Tolstedt, and $28 million from former Chief Executive John Stumpf.
Those new clawbacks are in addition to the bank's move last year to cancel about $41 million in stock awards for Stumpf and $19 million for Tolstedt.
The report was commissioned by the bank's board last year and prepared by the Shearman & Sterling law firm. It alleged that Tolstedt not only failed to see the potential harm caused by unauthorized account openings and other unethical sales practices _ but that she tried to keep information about those practices away from the board and others at the bank. That included the number of workers fired for unethical conduct.
"Tolstedt effectively challenged and resisted scrutiny," the report said, describing Tolstedt and members of her "inner circle" as "insular and defensive."
Tolstedt, on the advice of her lawyer, declined to be interviewed during Shearman & Sterling's investigation, according to the report.
In an emailed statement Monday, Enu Mainigi, an attorney for Tolstedt, said, "We strongly disagree with the report and its attempt to lay blame with Ms. Tolstedt. A full and fair examination of the facts will produce a different conclusion."
Stumpf, meanwhile, was overly deferential to Tolstedt, the report found, and to the bank's longstanding focus on cross-selling, which required employees to sell multiple services to individual customers. As a result, it said, he was "too late and too slow" to make changes.
The report paints the bank's board, meanwhile, as being out of the loop on the scope of the sales problems. Asked Monday if he should resign, Wells Fargo Chairman Stephen Sanger, who has been on the bank's board since 2003, defended the board's actions, saying it has acted properly since the scandal came to light.
"As we got information, we acted appropriately," he said.
Echoing the Shearman & Sterling report, Sanger said the board was not made aware of the scope of the problem _ millions of potentially unauthorized accounts, and 5,300 workers fired for bad practices _ until the bank reached a $185 million settlement with regulators last year.
The internal bank investigation was released just days after an influential shareholder advisory firm said that board members failed to properly oversee the bank and could have done more to prevent "unsound retail banking sales practices."
Institutional Shareholder Services, which advises big investment firms on corporate governance issues, recommended Friday that shareholders vote against the election of 12 of the bank's 15 board members, including Sanger, at the bank's upcoming annual meeting.
The bank's board called that recommendation "extreme and unprecedented," and said shareholders should wait for the release of the Shearman & Sterling report.
In a statement Monday, Dennis Kelleher, chief executive of banking advocacy group Better Markets, said he supports ISS' recommendation and that the report demonstrates that the board was out of touch or willfully ignorant.
"It is clear that the board was seriously and repeatedly misled by numerous officers, including a number who remain in senior positions at the bank," Kelleher said. "Moreover, it's equally clear that the board members themselves had a grossly deficient see-no-evil, hear-no-evil view of their role as fiduciaries at the third largest bank in the country."
Wells Fargo's practices were uncovered in a 2013 Los Angeles Times story that found overbearing sales pressure was leading bank employees to create bank accounts for customers without their knowledge or authorization.
Monday's report found that Wells Fargo took steps to address problematic sales practices in 2002 and noticed a big uptick in firings over sales-practices violations by 2004 _ nearly a decade before The Times story and a dozen years before the bank's practices came to national attention.
The Los Angeles city attorney sued the bank in 2015, and Wells Fargo agreed on Sept. 8, 2016, to pay $185 million to regulators. The bank has said that as many as 2.1 million checking, savings and other accounts were created without customer authorization. The settlement created a firestorm and congressional inquiries during which Stumpf was pilloried.
Stumpf resigned in October and was replaced by Timothy Sloan, the bank's president and chief operating officer, who has led the bank's effort to put the scandal behind it.
The bank has fired a handful of regional banking executives, cancelled bonuses for top executives and eliminated sales goals for branch workers. It has also made changes at the corporate level aimed at ensuring different business units at the bank have stricter oversight _ something Shearman & Sterling found was lacking in the past.
Still, those steps and Monday's report will not put an end to Wells Fargo's troubles.
Last month, the bank agreed to pay $110 million to settle a class-action lawsuit filed two years ago over the unauthorized accounts. However, attorneys representing plaintiffs in similar cases have said they expect to object to the deal and hope to get a better one.
Several federal and state agencies also have opened their own investigations into the bank's practices, looking for evidence of criminal identity theft, violations of labor law and other possible failings.
In one recent development, the Occupational Safety and Health Administration this month found that the bank in 2010 improperly fired a manager after he reported potential fraud to Wells Fargo's in-house ethics hotline. OSHA ordered the bank to rehire the manager and pay him $5.4 million in back pay, damages and legal fees.
That finding, which Wells Fargo has said it will challenge, seems to back up claims of other former workers who say they were fired for reporting unauthorized account openings and other ethics violations. In its report, Shearman & Sterling said it has not found "a pattern of retaliation," though it noted that finding is based on a limited review.
The scandal has taken a toll on Wells Fargo's consumer banking business. Over the last several months, the company has seen a marked slowdown in customers visiting branches and opening new accounts.
The bank reported that credit card applications were down 53 percent in February compared with the same month last year, while customers opened 40 percent fewer checking accounts.
But those flagging figures and the hundreds of millions of dollars the bank has agreed to pay in refunds and civil and regulatory settlements haven't turned off investors or meaningfully damaged the bank's bottom line.
The bank reaped a profit of $21.9 billion last year and its stock, which fell sharply in the wake of last year's regulatory settlement, is back to trading near its all-time high.
Shares of Wells Fargo were down 24 cents to $54.60 in late morning trading.
