For more than 400 employees recently laid off by Wells Fargo, the aftermath of the bank’s scandal over sham accounts has had an unexpected consequence: The bank is prohibited from paying the severance it owes them.
In mid-November, Wells Fargo’s federal regulator, the Office of the Comptroller of the Currency, imposed additional restrictions on the troubled bank. The rules, part of which are intended to curb golden parachute packages, limit what payments Wells Fargo is permitted to make to terminated employees without explicit regulatory approval.
Routine severance pay is sometimes exempted from such restrictions, but the federal rules for golden parachute pay are complex, and Wells Fargo’s severance plan is not eligible for the exemption, according to Diana Rodriguez, a bank spokeswoman.
Former employees at all levels of the company, from rank-and-file branch workers to corporate executives, are affected by the hold. Wells Fargo’s severance packages typically run from six weeks of pay to as long as 16 months, depending on the employee’s length of service.
The people affected are those whose jobs have been cut as part of Wells Fargo’s regular business adjustments. They are not accused of wrongdoing. Workers who are fired for cause, such as those involved in the scandal, are not eligible for severance. In recent years, the bank has terminated 5,300 employees in connection with its misconduct.
The bank has asked the Office of the Comptroller of the Currency for approval to make severance payments but has not yet received it, Rodriguez said. The payments add up to several million dollars.
Wells Fargo has temporarily stopped all layoffs until it can resolve the issue. The freeze began on Nov. 21, three days after the bank was notified of the additional restrictions.
But about 400 workers who were terminated right before the additional restrictions were imposed are caught in limbo. Wells Fargo has told them that their severance payments are indefinitely delayed.
“We are deeply sorry for the hardship this creates for affected team members, and we are doing everything in our power to resolve the situation as quickly as possible,” Rodriguez said.
Bryan Hubbard, a spokesman for the OCC, declined to elaborate beyond the highly technical two-sentence statement the agency released in November describing the additional restrictions being placed on Wells Fargo.
Wells Fargo has been in turmoil since September, when it admitted that thousands of its employees, under pressure to meet aggressive sales goals, had created as many as 2 million fraudulent accounts in the names of real customers. Some customers did not learn of the sham accounts until they began incurring fees on them.
The OCC – which participated in a $185 million settlement deal with Wells Fargo that resolved several government lawsuits – initially let the bank off fairly lightly, exempting it from some of the restrictions normally imposed on banks that break the law. Two months later, it reversed course and tightened its grip.
What kind of oversight banks will face in the future is an open question.
President Donald Trump said this week that Betmatik he intended to “dramatically reduce federal regulations” and do “a big number” on the Dodd-Frank Act, the Obama-era law that increased Wall Street restrictions. Republicans have already begun floating proposals to strip funding and powers from the Consumer Financial Protection Bureau, the regulatory agency that, with the OCC, investigated Wells Fargo and drew national attention to its illegal acts.
Investigators, including some hired by Wells Fargo, are still figuring out the full extent of the bank’s misdeeds.
In a meeting this month with Wells Fargo employees, Tim Sloan – who took over in October, after the bank’s longtime leader, John Stumpf, was felled by the scandal – acknowledged what a number of employees had previously said: that the bank had retaliated against some workers who had tried to blow the whistle internally on its actions.
Wells Fargo hired an outside investigator to review all calls made in the last five years to the bank’s ethics hotline in which the employee gave a name. About 40 percent of those who called identified themselves, the bank said.
In reviewing the records of employees who were fired within 12 months of making a call, the bank’s investigator found a few cases that “raised questions,” Sloan said. “Even though it’s a very small number, anything more than zero is too large.”
The bank is still researching those cases. Wells Fargo will “work with each individual” on potential remedies, said Richele Messick, a Wells Fargo spokeswoman.
“We are continuing to investigate, and whatever we find, we will make right,” Messick said.
Separately, Sen. Elizabeth Warren, D-Mass., asked the Labor Department to provide an update this week on the status of its investigation of Wells Fargo.
In September, Thomas Perez, the labor secretary at the time, promised a “top-to-bottom review” of complaints filed against Wells Fargo. But a Labor Department web page on which Wells Fargo employees could report violations has abruptly disappeared, Warren noted in a letter sent Friday.
“Taking down this website enables Wells Fargo to escape full responsibility for its fraudulent actions and the department to shirk its outstanding obligations to American workers,” Warren wrote.
That page was taken down in early January, nearly two weeks before Trump’s inauguration, according to Stephen Barr, a Labor Department spokesman. He declined to comment on why the page had been removed.
“The investigation is ongoing,” Barr said. “We’re going to respond to the senator, but there’s no change here in the status of the review.”
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