The hard fall of Wells Fargo’s Carrie Tolstedt

NEW YORK - Her banking career ended in scandal, but the start was straight out of the storybooks.

The way Carrie Tolstedt told it, she caught the banking bug early when she was a child in a small Nebraska town. Her father ran the local bakery, and she would join him on his visits to the local bank after a day’s work. The tellers were so nice.

“They knew my dad by name,” she told American Banker in 2010. “They treated him with respect.” 

Tolstedt would eventually rise to oversee thousands of tellers and other front-line workers at more than 6,000 Wells Fargo (WFC) branches. She would earn numerous awards, draw praise for blazing a path for other women and take home millions a year before a sales scandal at the bank threw those accomplishments into damaging light.

The report released Monday by the bank’s board of directors accused Tolstedt of downplaying problems at the branches and bucking at scrutiny over fraudulent sales practices under her aegis. It recommended that the bank claw back $47.3 million that she had received in stock options, on top of $19 million it had previously taken away.

Williams & Connolly, a law firm representing Tolstedt, said “we strongly disagree” with the report and that a “full and fair examination of the facts will produce a different conclusion.”

The report is a stunning rebuke for an executive who had received nothing but praise from the bank until recently. In July, when Tolstedt announced her retirement after 27 years, former Wells CEO John Stumpf, who was also caught up in the scandal, called her a “role model” for others in the industry.

Her upbringing in Kimball, Nebraska, was prized at a bank that sees itself as more Main Street than Wall Street and long run by executives with similarly modest, small-town roots. Stumpf was raised on a farm in Minnesota, one of 11, and shared a bed with his brothers. His predecessor, Richard Kovacevich, used to help his father with his work as a butcher at a local supermarket.

Watching her own father at work, Tolstedt told U.S. Banker magazine, she came to appreciate the difficulties of running a small business, how owners have to juggle finance and marketing and so many other tasks at once. She said the experience also drilled in her the importance of constantly checking that customers are happy.

“With a bakery in a small town, you are serving your friends and neighbors every day,” she told the magazine in a 2005 interview. “So you never ever want to let your customer down.”

A graduate of the University of Nebraska, Tolstedt joined a Wells’ predecessor bank called Norwest in 1986, rose to oversee branches in Omaha, then all of them in 39 states. One of her biggest goals, and one directly tied to her pay, was to increase the bank’s so called “cross-sell ratio,” a measure of how many different banking accounts were held on average by customers.

One rallying cry: “Eight is Great,” meaning sell eight accounts or services to each customer.

Tolstedt encouraged tellers and customer service reps to come up with their own ways of getting people to open checking accounts, credit cards accounts and sign up for other products at the bank. The branches, she enthused in one interview, were laboratories for experimenting.

And experiment they did and to great success -- for a while at least.

A Nebraska market manager came up with a “sales road map,” a cheat sheet of what order to pitch accounts and services to increase the likelihood that customers would sign up. A marketer in Denver came up with the “Wells Fargo Pack” that offered customers discounts on fees if they agreed to a handful of accounts and services at once.

Stumpf, whom Tolstedt reported directly to for years, was effusive in his praise of her.

“When you mix that intellect and attention to detail with this wonderful human -- a person who can empathize and deal with a team -- that’s where the magic happens,” he told U.S. Banker in 2007.

Wells doubled its branches in recent years, increasing the opportunities for cross-selling ideas to spread across the company, including bad ones like opening accounts for customers without their approval.

To the end, Stumpf was full of compliments for her. In the press release on Tolstedt’s retirement last year, at age 56, he called her a “principled” banker and a “dear friend.” Wells paid her $9.5 million in 2015, citing her “strong cross-selling ratio” and her work “reinforcing a strong risk culture,” according to regulatory documents.

In his grilling before Congress last year before he stepped down in disgrace, Stumpf said he was “deeply sorry” the bank didn’t act sooner to stem the misconduct. As for firing Tolstedt, though, he said he never even considered it.