Wells Fargo report gives inside look at the culture that crushed the bank's reputation

Wells Fargo board takes further action against Stumpf and Tolstedt

A high-level investigation into the fake accounts scandal at Wells Fargo blamed a "sales-oriented culture or a decentralized corporate structure" that "unfortunately coalesced and failed dramatically," resulting in one of the worst banking controversies in years.

A report obtained by CNBC detailed the findings of the investigation, which was overseen by a special board committee chaired by Stephen Sanger and including three other independent directors: Elizabeth Duke, Enrique Hernandez and Donald James. To assist the special committee, the group retained law firm Shearman & Sterling.

The investigation included 100 interviews of current and former employees, reviewed information concerning more than 1,000 existing and past investigations, and searched more than 35 million documents.

The review was particularly critical of the former head of Wells Fargo's community bank unit, Carrie Tolstedt, and the way she and her team allegedly cultivated a culture that led to wrongdoing:

"Even when challenged by their regional leaders, the senior leadership of the Community Bank failed to appreciate or accept that their sales goals were too high and becoming increasingly untenable."

"It was convenient instead to blame the problem of low quality and unauthorized accounts and other employee misconduct on individual wrongdoers."

"Effect was confused with cause. When Wells Fargo did identify misconduct, its solution generally was to terminate the offending employee without considering causes for the offending conduct or determining whether there were responsible individuals who, while they might not have directed the specific misconduct, contributed to the environment that increased the chances of its occurrence."

Tolstedt did not respond to a CNBC request for comment, but Reuters quoted attorneys for the former executive as saying "we strongly disagree with the report and its attempt to lay blame with Ms. Tolstedt." A full examination of the facts will produce "a different conclusion," the attorneys said.

The report provided detailed examples of how this culture manifested.

Witnesses interviewed as part of the report cited daily and monthy "Motivator" reports as a source of pressure, so much so that some "lived and died by" the Motivator results. Those reports were discontinued in 2014.

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Retail scorecards, instituted by Tolstedt, also "generated significant sales pressure."

But the practice that witnesses described as "a breeding ground for bad behavior" was the "Jump into January" sales campaign, aimed at kicking off each year with strong numbers: "The Community Bank was hesitant to end the program because Tolstedt was 'scared to death' that it could hurt sales figures for the entire year."

'Running the gantlet'

Los Angeles and Arizona were repeatedly the worst regions for such practices. Shelley Freeman — who was regional president in Los Angeles until 2009, before taking over as lead regional president in Florida until 2013 — was terminated for cause.

One story related in the report described how Freeman was particularly aggressive with her "Jump into January" promotions. Witnesses described the practice of "running the gantlet," in which district managers dressed in themed costumes, formed a gantlet and had managers run individually down the line to a whiteboard where they were to report their sales numbers.

Freeman did not immediately respond to a CNBC request for comment.

Meantime, Pam Conboy, Arizona regional banking's leader from 2007 to 2017, managed to drive Arizona from last place to first in community bank regional sales performance rankings within two years of taking her position.

"Multiple witnesses also said that Conboy or certain of her subordinates encouraged bankers to sell customers 'duplicate accounts' regardless of actual customer need," the report says, adding that "Tolstedt held Conboy up as a model for success."

CNBC was unable to reach Conboy for comment.

Conboy was also terminated for cause.

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