Wells Fargo takes back $75M
EGA reports Cambodian casino losses
WELLS Fargo took back another $75 million in pay from two former executives who played key roles in the bank’s fake accounts scandal, the bank’s board announced Monday.
The US banking giant said it demanded or “clawed back” an additional $28 million from former chief executive John Stumpf, who led the bank at the time of the scandal, and $47 million from former community banking chief Carrie Tolstedt, whose division was at the heart of the problem.
Together with an earlier round of punishments of the two senior executives, Wells Fargo has clawed back a total of $69 million from Stumpf and $67 million from Tolstedt.
The moves came as Wells Fargo, a leader in consumer and mortgage banking, released a 110-page report analysing the factors behind the scandal that involved opening of about 2 million deposit and credit card accounts without the customers’ approval or knowledge.
Wells Fargo has been castigated by politicians and analysts since news of the scandal broke in September 2016 when the bank reached a settlement with regulators to pay $185 million.
Since that time, Wells Fargo has replaced its chief executive and announced a series of reforms, such as eliminating product sales goals in retail banking. However, the bank continues to face numerous government probes of the matter.
The report, undertaken by the Wells Fargo board and with help from the Shearman & Sterling law firm, said exCEO Stumpf “was too slow to investigate or critically challenge sales practices in the Community Bank,” nor did he “appreciate the seriousness of the problem and the substantial reputational risk to Wells Fargo”.
In addition, a decentralised structure gave “too much autonomy to the Community Bank’s senior leadership, who were unwilling to change the sales model or even recognize it as the root cause of the problem.
The report sheds light on how the bank’s desire to show strong growth on cross-selling – the practice of convincing existing clients to open new accounts – led to ethical breaches and created a brutal sales-first culture.
Managers within Community Banking exerted “significant, and in some cases, extreme pressure on employees to meet or exceed their goals”, sometimes calling subordinates several times a day to check on sales, the report said.
The bank fired many lowranking employees for opening the fake accounts, but there was little questioning of the role of perverse incentives as a factor in the scandal.
The report comes ahead of Wells Fargo’s April 25 annual meeting, where board members are facing the risk of a shareholder revolt.
The report largely exonerated chief executive Tim Sloan, who was portrayed as trying to get a grasp on the extent of the problem and as less deferential to Tolstedt than predecessor Stumpf. NASDAQ-LISTED Entertainment Gaming Asia (EGA) reported a net loss of $6.7 million for the fourth quarter of 2016, compared with a loss of $2.7 million in the same time in 2015 largely due to the cancellation of its operations in Cambodia, the company said in a filing on Monday.
“During 2016, we disposed of all of our gaming assets in Cambodia, certain gaming assets in the Philippines and the principal assets of the gaming products business,” said Clarence Chung, chairman and chief executive of EGA, in an accompanying statement.
The electronic gaming machines (EGMs) supplier added that the closure of Cambodian operations incurred a net loss of $4.3 million.
The company began winding down its presence in the Kingdom in July of last year when it announced that it was selling 670 EGMs placed in the NagaWorld casino to an unnamed Cambodian party for $2.5 million. Then, in October, it sold all 71 of its EGMs in Thansur Bokor Highland Resort in a cash payment valued at $250,000.
Finally, in December of last year, the firm announced that it had fully offloaded 278 EGMs placed i n Dreamworld Club Poipet, including 72 EGMs held in storage in Cambodia for a cash payment of $900,000. It also sold of its gaming chip and table equipment arm last May for $5.9 million.
“These sales have provided cash proceeds of $10.3 million and the potential for earn-outs on certain gaming chip and plaque sales related to the now discontinued gaming products business. To date, we have received $8.1 million of the sales proceeds and no earn-outs on gaming chip and plaque sales,” Chung added. “We currently have approximately $32 million in cash and are exploring avenues to apply these resources.”
The company, which is majority controlled by Hong Kong-listed Melco International Development Ltd, reported that the firms consolidated total revenue for 2016 was approximately $2 million, a decrease of 26 percent garnered from its existing operations in the Philippines, while EGA reported a net loss of nearly $9.7 million compared with an income of $820,000 in 2015.