Former Wells Fargo CEO Tim Sloan on Friday sued the bank he once led, claiming it owes him more than $34 million in canceled stock awards, unpaid bonuses and “emotional distress.”
Wells Fargo is “depriving Mr. Sloan of tens of millions of dollars in deferred compensation he had earned during his career,” attorneys wrote in the complaint, filed in California state court and seen by Bloomberg. “To this day, Wells Fargo has failed to identify anything Mr. Sloan did or failed to do that would justify its decision.”
Wells Fargo, meanwhile, said Friday it “stand[s] behind our decisions in this matter.”
“Compensation decisions are based on performance,” Beth Richek, a spokesperson for the bank, told The New York Times.
Sloan became Wells Fargo’s chief executive weeks after the bank’s 2016 fake-accounts scandal went public. He joined the bank in 1987 and rose through its wholesale arm — not the consumer-banking division where employees were found to have opened millions of unauthorized accounts, without customers’ knowledge, to meet lofty sales goals.
Wells Fargo’s previous CEO, John Stumpf, had stepped down as the scandal erupted, leaving Sloan, the bank’s president and chief operating officer since the previous November, as the obvious successor.
The Office of the Comptroller of the Currency in 2020 would fine Stumpf $17.5 million and ban him from the banking industry. Sloan, however, faced no such penalty.
A 2017 investigation into the fake-accounts scandal by Wells Fargo’s board largely exonerated Sloan, but he nonetheless faced intense scrutiny.
The Federal Reserve imposed a cap limiting Wells’ asset total to $1.95 trillion during Sloan’s tenure. That cap has yet to be lifted.
Asked by a lawmaker at a March 2019 hearing whether Wells Fargo could promise it would no longer harm customers, Sloan replied, “I can’t promise you perfection,” according to The New York Times.
In the ensuing week, calls from Capitol Hill mounted for Wells to dismiss Sloan, and the OCC said it was “disappointed” in the bank’s progress in addressing the issues that led to the 2016 scandal.
Sloan stepped down, saying, according to Bloomberg, that the focus on him had become “a distraction that impacts our ability to successfully move Wells Fargo forward.”
In Friday’s lawsuit, Sloan’s lawyers cast his resignation as “an act of further loyalty to the bank,” according to The New York Times.
Wells Fargo “used Mr. Sloan as a scapegoat even though he was not responsible for the sales-practices abuses that prompted the congressional review, and despite the energy and resources he committed to meeting regulatory demands and righting the ship,” his lawyers wrote, according to Bloomberg. “Other than politically charged, financially motivated and factually unsupported rhetoric from the bank’s critics, there is no documented criticism of his performance regarding the outstanding regulatory matters or anything else prior to his retirement.”
Sloan joined the investment firm Fortress in March 2020. That same month, Wells Fargo canceled a $15 million bonus it had given to Sloan — an action the ex-CEO’s lawyers, in Friday’s lawsuit, called “a public show.”
Sloan opted not to negotiate a severance agreement “in a spirit of mutual trust,” the lawyers wrote, according to the Financial Times, adding that Wells Fargo “reneged” on verbal promises to pay out his long-term grants.
Sloan “bore the brunt of public criticism, much of it directed at Wells Fargo policies and practices that predated his tenure as COO or CEO and which he was working assiduously to correct,” the lawyers wrote, according to the Financial Times.
The bank hired Charlie Scharf, then CEO of BNY Mellon, to succeed Sloan in 2019. In his first earnings call as Wells Fargo’s top executive, Scharf said “advancing our required regulatory work with a different sense of urgency and resolve” was his “primary focus.”
During Sloan’s tenure, the value of Wells Fargo’s shares jumped about 8.3%, Bloomberg reported.
