Wells Fargo feeds Sloan to the lions. Who's next?
Plus: Are you sitting on a gold mine?; Financial adviser Jim Heafner speaks; French solve Garfield mystery
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Good morning! Today is Friday, March 29, 2019. Here are today’s big stories in Charlotte-area business news:
In defense of a fat cat banker:
Anybody who watched Wells Fargo CEO Tim Sloan this month during his show trial, er, hearing in front of the House Financial Services Committee could tell he was in trouble.
When politicians weren’t yelling at him, cutting him off and accusing his bank of all manner of abuses — some legitimate, some laughable — Sloan calmly and patiently described the many steps Wells Fargo has taken to correct the series of highly publicized scandals that dated to before he became CEO in 2016. The worst, of course, was the revelation that the bank opened millions of fake customer accounts earlier this decade to meet ambitious sales goals.
But in leadership, perception becomes reality. And the perpetual outrage machine aimed at Sloan from bank opponents had become a distraction to the bank’s reform efforts. So Thursday, Sloan, 58, surrendered to the mob. He said in a statement:
I am very proud of what we have accomplished together. In my time as CEO, I have focused on leading a process to address past issues and to rebuild trust for the future. We have made progress in many areas and, while there remains more work to be done, I am confident in our leadership team and optimistic about the future of Wells Fargo. However, it has become apparent to me that our ability to successfully move Wells Fargo forward from here will benefit from a new CEO and fresh perspectives.
His opponents took a victory lap:
Sloan was unable to satisfy people who refused to be satisfied. In hindsight, Wells Fargo’s decision to promote an insider like Sloan instead of bringing in an outsider to clean house is looking increasingly like an error, yet another example of the failure to understand the magnitude of the bank’s problems.
Wells Fargo sacrificed Sloan’s predecessor, John Stumpf, in 2016. Now it is sacrificing Sloan. Let’s see who steps forward to take this thankless job.
Warren Buffett on Sloan, just before Thursday’s announcement: “I don’t want his job. ... I’m very empathetic to anybody who walks into a big problem and a very, very large and politically sensitive institution.” Buffett’s Berkshire Hathaway is Wells Fargo’s largest shareholder.
San Francisco-based Wells Fargo is Charlotte’s second-largest employer, with about 25,500 workers in the city.
Golden parachute? Wells Fargo says Sloan will not receive a windfall by retiring. Securities documents say executives work with no employment contracts or severance agreements. The company said Thursday:
Mr. Sloan will not receive any special treatment or additional compensation arrangements in connection with his retirement. Because he has met age and service requirements, he will be accorded the normal retirement treatment under the Company’s plans that are applicable to all eligible team members.
New boss, same as old boss? Wells named Allen Parker, the bank’s general counsel, as interim CEO. He will earn a $2M salary, with a chance to earn another $2M in performance-based incentive pay, and was granted $2M in restricted stock. Before joining Wells in 2017, he was at a big New York law firm. He’s a Duke grad (Class of ’77). Don’t hate on him too much.
Interim CEOs tend to be caretakers who make few bold moves.
‘Deep restructuring’ ahead? A piece by the Wall Street Journal — “Wheels Come Off Wells Fargo Stagecoach Yet Again” — forecasts that a new CEO will have to come in and make more fundamental changes than Sloan. The turmoil, it says, is likely to continue:
As general counsel, [Parker] is doubtless well briefed on the bank’s compliance challenges, but regulators seem to be demanding a fundamentally different approach from the bank, which may require more deep restructuring. The board will also have the added distraction now of finding a new CEO.
Wells Fargo has been stuck in a rut for years, and it isn’t out yet.
Wells Fargo gallows humor:
Backyard gold:
You might have heard of the Carolina Gold Rush in the early 1800s, or even been to Reed Gold Mine in neighboring Cabarrus County.
But did you know there are 57 old gold mines in Mecklenburg County?
Local NPR stations aren’t usually known for their snazzy website graphics, but WFAE has a neat interactive map where you can check if there is one near your house. They are spread throughout the county, but most seem to be clustered north of uptown. Full map here.
Coming to an old gold mine near you?
Related piece of useless knowledge: There are 10 companies in Mecklenburg County engaged in mining, according to the Bureau of Labor Statistics. Combined, they employ fewer than 100 people here.
Heafner speaks:
Other local media this week have cast some light on the saga of Jim Heafner, the high-profile financial adviser accused of selling unregistered securities offered by a bankrupt Florida company called 1 Global Capital that’s under SEC investigation. 1 Global is accused of diverting the money to risky investments and to finance its CEO’s lavish vacations and Mercedes-Benz payments. Three investors have filed complaints against Heafner. The one wrinkle that keeps this from being a dry and complicated financial story is that the 1 Global CEO is also the former publisher of Playgirl and High Society.
Heafner has been a regular on local TV and radio, where he dispensed financial advice in segments that sounded chatty and conversational but were actually glorified commercials. We ran a piece on Heafner on Monday. The Biz Journal was first to report the story last week.
Now, more information is surfacing. WBTV on Thursday landed the first response from Heafner, who said:
Everything we saw about [1 Global] looked really good, and everything looked safe as it could possibly be. [I] made a recommendation based upon what we believed to be true.
WBTV also said Heafner “paid for sponsored content on WBTV's lifestyle program Morning Break” — the clearest indication yet that Heafner’s appearance as a savvy financial adviser on WBTV’s airwaves was actually a glorified ad. Because that certainly wasn’t clear from watching “Morning Break.” I’ve seen nothing yet from other stations where Heafner appeared, including WCNC and WSOC.
Meanwhile, the Observer, in a story on Wednesday, confirmed Heafner’s whereabouts. His former PR guy in Charlotte had said Heafner “no longer resides in the continental United States,” which immediately cast suspicion on Alaska and Hawaii. But the correct answer, Alex, is “What is Puerto Rico?”:
[Lawyer Charlie] Bridgmon also said that Heafner is retiring and plans to close his south Charlotte business at the end of this month. And Bridgmon confirmed media reports that Heafner has been residing in Puerto Rico for at least the past three or four months.
Advice: So what’s the lesson here? If you are working with a financial adviser, make sure you know how he or she is being compensated. If your adviser is earning money from selling you products such as life insurance, annuities or mutual funds with 12b-1 fees, you might want to seek other options. Ledger reader Nick Foy, a certified financial planner and founder of Greenway Wealth Advisors, an independent firm based in South End, says:
Understanding the source of their income and the potential for conflicts of interest is important. If they're getting paid by anyone other than the client, it's probably a good idea to consult with a fee-only advisor for a second opinion.
You can find one of those at NAPFA.org.
Forging money
Nucor announced this week that it is building a new steel mill in Kentucky. The Bluegrass State seems happy with it, as it is a $1.35B investment that will create 400 jobs averaging $72,000 a year. These are heady times for Nucor, which is based in SouthPark. The company is riding high on steel tariffs, made $2.4B in profit last year, and gave its CEO a raise that lifted his annual compensation to $16M.
But times apparently aren’t heady enough to refuse tax incentives, according to the Louisville Courier-Journal:
About an hour before the announcement, the Kentucky Economic Development Finance Authority voted to offer about $40 million in state incentives to the company. It will provide $30 million in … performance-based income tax credits and wage assessments to companies. In addition, it is offering $10 million in incentives through the Kentucky Enterprise Initiative Act, which provides refunds of state sales and use taxes that companies pay for certain building and construction materials.
Briefly:
Sir Purr’s new home? The Panthers are considering building their headquarters and practice facility off Interstate 77 south of Cherry Road in Rock Hill, the Observer says, citing Rock Hill’s mayor. That’s about 10 miles south of the state line. The shakedown of South Carolina for $155M in tax breaks is ongoing.
Takeover: Protestors stormed a Charlotte Center City Partners event on affordable housing this week:
Coke fiend: Coke Consolidated CEO Frank Harrison earned a small raise to $11.6M in 2018, N.C. Business News Wire reported. That’s a whole lot of Orange Vanilla Coke.
Creepy read of the week: “Airbnb Has a Hidden-Camera Problem.” Key passage:
That was when he saw the light. Two small, black, rectangular boxes were stacked next to an outlet on the far side of the guest room, both facing the bed. From afar, they looked like phone chargers. But when [he] got closer, he realized they were cameras, and they were recording.
Housing boom ahead? The WSJ today says: “Mortgage rates are fast approaching 4%, a rate low enough that economists and lenders believe it will help jump-start the housing market again.”
Food and booze news
A weekly wrap-up of the week’s eating and drinking developments:
Ah, the vague memories: Venerable uptown restaurant Rock Bottom closed this week. A Charlotte Agenda reader reminisces: “Hate to see Rock Bottom close. A friend once passed out in their bathroom — she literally hit rock bottom. Now when I warn my future children about the perils of drinking too much, I’ll be referencing a bygone establishment.”
Community Matters Cafe, a project of the Charlotte Rescue Mission, is set to open April 7 in Third Ward, near the intersection of Cedar Street and West First Street. (Reported at Unpretentious Palate.)
Church —> Restaurant. A Plaza-Midwood church across from Whiskey Warehouse will become a restaurant called Supperland, which has ownership ties to Haberdish and Crepe Cellar. Charlotte Agenda reports it will include an “ambitious craft cocktail bar,” which is now apparently a code requirement for new Charlotte restaurants.
Loves me some internet
Status of decades-old French Garfield telephone mystery: SOLVED.
From the BBC:
A French coastal community has finally cracked the mystery behind the Garfield telephones that have plagued its picturesque beaches for decades. Since the 1980s, the Iroise coast in Brittany has received a supply of bright orange landline novelty phones shaped like the famous cartoon cat.
Anti-litter campaigners have been collecting fragments of the feline for years as they clean the beaches.
But now, the source of the problem has been found — a lost shipping container.
Never underestimate French determination, even after 35 years:
Members of the Ar Viltansou group, accompanied by Franceinfo journalists, set out to find it.
Climbing down the slippery rocks to the cave, the team spotted remnants of a destroyed shipping container — and soon, between the rocks, Garfield phones — in a more complete condition than any found before them.
Au revoir to l’affair des téléphones Garfield.
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The Charlotte Ledger is published by Tony Mecia, an award-winning former Charlotte Observer business reporter and editor. He lives in Charlotte with his wife and three children.