Is the economy rigged in favor of the wealthy and powerful? Let’s look at two recent examples, and you tell me:
Last week, Wells Fargo announced a major settlement with the federal Consumer Finance Protection Bureau and other regulators in which the giant bank agreed to pay $185 million in fines. According to the CFPB, Wells Fargo employees had systematically created tens of thousands of fraudulent customer accounts, home-equity lines and credit cards without authorization or even knowledge of the customers involved, all so the employees could meet company sales quotas.
(A little context: The CFPB that investigated and nailed Wells Fargo is the same CFPB targeted for extinction by congressional Republicans as part of their effort to deregulate Wall Street and the banking industry. And while the $185 million fine may sound large, it amounts to a mere 3 percent of Wells Fargo’s second-quarter profit of $5.6 billion.)
The illegal practices at Wells Fargo extended for a five-year period and were extremely widespread. Almost 2 million false accounts were created by bank employees trying to reach quotas needed to keep their jobs or earn bonuses. In the aftermath of the scandal, Wells Fargo announced that it had fired some 5,300 employees who were involved in the long-running practice. That suggests a very extensive problem.
Yet in an interview Tuesday with the Wall Street Journal, Wells Fargo CEO John Stumpf denied that the bank’s incentive system had gone awry and denied that his company had a culture problem. He put responsibility solely on the employees rather than on bank leadership.
“If they’re not going to do the thing that we ask them to do—put customers first, honor our vision and values—I don’t want them here,” he said. “I really don’t.”
If you’re hearing echoes of the late Beverly Hall, former superintendent of Atlanta Public Schools during the testing scandal, you’re not alone.
Oh, and the person who has headed Wells Fargo’s community banking division, where all these problems developed? That would be Carrie Tolstedt, who just last year was named the second most powerful woman in American banking. The bank announced Tolstedt’s retirement back in July, before news of the settlement broke. Stumpf lauded her at the time as “a standard-bearer of our culture, a champion for our customers, and a role model for responsible, principled and inclusive leadership.”
While thousands of her employees were fired, Toldstedt walks away with $124.6 million in stocks and options, her reward for a job well done.
Does the name Mylan NV ring a bell? It should. Mylan owns the rights to the life-saving EpiPen, and since acquiring the product in 2007, it has raised its price by a startling 550 percent in the U.S. market, putting an immense financial burden on many American families.
As it turns out, Mylan executives have had a very good personal reason for imposing those price increases. They are already extremely well-paid, even in comparison to executives at much larger pharmaceutical companies. But in 2014, they were given a huge new incentive package. If Mylan’s top five executives succeed in “doubling the company’s adjusted per-share earnings over a five-year period ending in 2018,” the Wall Street Journal reports, they will share as much as $82 million in additional bonuses.
However, if they don’t reach that at least 90 percent of that extremely ambitious goal, the bonus program pays them nothing. So by doubling the cost of the EpiPen, their company’s top-selling product, they go a long ways toward earning that bonus for themselves even as they raise the cost of health care and insurance for everyone else.
Three other points worth noting:
- Mylan is based here in the United States, with American leadership and heavy reliance on the American market. In 2014, however, the company moved its nominal headquarters to the Netherlands as a tax-dodge scheme.
- Mylan’s CEO is Heather Bresch. When she became COO of the company in 2007, she had claimed to have earned an executive MBA from West Virginia University. She had not. Astonishingly, the university itself participated in the scam, creating false transcripts that gave Bresch class credits and grades that she had not earned. When the scandal was revealed, the university president, provost and business school dean were forced to resign.
- Bresch is the daughter of Sen. Joe Manchin, D-WV. At the time of the WVU degree scandal, Manchin was serving as governor of West Virginia.