As Wells Fargo Investors Meet, CEO Faces Scrutiny of Unit He Ran
(Bloomberg) -- Wells Fargo & Co.’s struggle to shore up money-laundering controls in its division serving companies may prove awkward for Chief Executive Officer Tim Sloan as he faces shareholders Tuesday.
Sloan led the wholesale unit for two and a half years before the bank promoted him to CEO in late 2016 to clean up scandals in the consumer business. Near the middle of his tenure atop the division -- in November 2015 -- the bank promised U.S. authorities it would overhaul systems for catching illicit transactions. Now, Wells Fargo plans to ask the OCC to extend a June 30 deadline to make good on the pledge, the Wall Street Journal reported Sunday, citing unidentified people familiar with the matter.
The division has been struggling to gather documentation showing who owns business clients with sales ranging from $5 million to $20 million, the newspaper said. If the bank misses the deadline, it could face another enforcement action. A Wells Fargo spokesman declined to comment, and an OCC spokesman didn’t immediately respond to a message seeking comment Sunday.
The regulator had flagged concerns to Wells Fargo in the years before Sloan took over the unit, according to a person with knowledge of the matter. There’s a nod to that in that 2015 consent order, which noted the firm had failed to make “acceptable substantial progress” on lapses previously identified.
Still, scrutiny of the wholesale division can only add to the tensions Sloan faces Tuesday, at what will probably be this year’s most rancorous shareholder meeting among major U.S. banks. Last week, the bank agreed to pay $1 billion to the OCC and the Consumer Financial Protection Bureau in the latest fallout from its consumer scandals. The accord gave the OCC unusual powers to remove executives or board members, including Sloan. The shares climbed afterward, as investors hoped it was putting scandals in the past.
Sloan was exonerated of wrongdoing in an internal review after the consumer banking scandal erupted. He’s spent much his time as CEO overhauling the bank’s controls, shuffling management and reshaping a culture long obsessed with sales targets to emphasize customer service. The aim is to rebuild trust with regulators, lawmakers and the public.
Demonstrations are planned in or around the downtown Marriott in Des Moines, Iowa, where the meeting will be held. Investors also may hear from other critics: California gubernatorial candidate John Chiang has called for Sloan to step down and for more board members to go. Even a person outfitted as Monopoly Man from the favorite American board game plans to make an appearance.
Disruptions could be more intense than those Wells Fargo saw at its 2017 meeting, when investors were being urged to vote out two-thirds of the board amid a long-running fake-accounts scandal. Last year’s meeting site was less accessible to protesters because it was held at a glitzy Florida golf resort property about 25 miles from of downtown Jacksonville.
This time, executives sought to avoid the criticism they heard for booking the Sawgrass Marriott Golf Resort and Spa in 2017, according to a person with knowledge of the matter. They rejected any location whose name included the words “golf” or “resort” for image reasons, said the person, who isn’t authorized to speak publicly. A Wells Fargo spokesman didn’t offer immediate comment.
At this year’s meeting -- the first to be overseen by Chairman Betsy Duke, a former Federal Reserve governor -- investors will have a chance to address board members as upheaval from scandal continues to rock the firm. Despite Friday’s settlements, the wealth-management unit is still being investigated by two federal agencies. The Fed is also limiting the bank’s growth.
Shareholders will consider whether to support 12 board members, four of whom are standing for election for the first time. Duke, John Baker II, Donald James, James Quigley, and Suzanne Vautrinot became Wells Fargo directors before the scandals began erupting in late 2016.
Investors also will vote on three shareholder proposals, including one introduced by Comptroller Thomas DiNapoli, trustee of the New York State Common Retirement Fund. DiNapoli is urging holders to vote to force the bank to produce a report examining whether its incentive-pay practices expose it to financial losses.
The bank’s stock lost 13 percent this year through Friday, while the 24-company KBW Bank Index rose less than 1 percent. Shares have gained about 5 percent since the firm’s consumer scandals erupted Sept. 8, 2016, as the index surged 49 percent.
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