Wells Fargo CEO to forfeit $45 million over scandal

LOS ANGELES — Wells Fargo & Co. Chief Executive John Stumpf will forfeit compensation worth about $45 million, part of the company’s response to the still-unfolding scandal over millions of fake accounts created by bank employees.

Stumpf will give up about 910,000 shares in unvested stock awards, and will not get a bonus this year, according to a statement released late Tuesday by members of Wells Fargo’s board of directors.

Also, Carrie Tolstedt, the executive in charge of the division at the heart of the scandal, will give up about $19 million worth of stock.

The decision by the board comes two days before Stumpf is expected to appear before the House Financial Services Committee.

Stumpf came under heavy criticism last week when he was grilled by the Senate Banking Committee. The San Francisco banking giant has acknowledged that thousands of bank workers opened as many as 2 million accounts for customers without their knowledge.

The bank has agreed to pay $185 million to federal regulators and the Los Angeles City Attorney’s office over the fake accounts, a practice regulators say was encouraged by an aggressive and poorly supervised sales culture.

Federal prosecutors are investigating the bank to see whether criminal charges should be filed, and the Labor Department said Tuesday it is investigating possible labor law violations. Meanwhile, the company is facing a mounting number of lawsuits from customers, employees and shareholders.

At last week’s hearings, Sen. Elizabeth Warren, D-Mass., called on Stumpf to step down.

“You should resign,” Warren said. “You should give back the money you took while this scam was going on, and you should be criminally investigated by the Department of Justice and the Securities and Exchange Commission.”

Warren and other senators pushed Stumpf to commit to giving back some of his pay and to take back pay from Tolstedt. He said at the time that any decisions about compensation would be left to a committee within the company’s board.

Late Tuesday, the independent members of Wells Fargo’s board — that is, members other than Stumpf — announced they have hired a law firm to investigate the bank’s sales practices. Stumpf, the chairman of the board, will recuse himself from matters related to the investigation, according to a news release.

According to that release, Stumpf and the board reached a deal that calls for him to give up all of his unvested stock awards, which the company valued at about $41 million, based on the closing price of Wells Fargo shares Tuesday.

Based on a review of the bank’s regulatory filings, the Los Angeles Times has estimated Stumpf’s unvested shares could ultimately have been worth as much as $52 million, though that figure includes the maximum potential value of some awards based on the bank’s performance.

Along with giving up his unvested stock, the board will not pay Stumpf a bonus for 2016. His annual bonus for the last several years has been $4 million.

Stumpf will also give up his salary during the investigation. With an annual salary of $2.8 million, Stumpf would lose about $54,000 per week.