Los Angeles Times
WASHINGTON — Lawmakers ripped into Wells Fargo & Co. head John Stumpf on Tuesday over the banking giant’s sales-practices scandal, with one senator calling on Stumpf to quit as chairman and chief executive.
“You should resign,” Sen. Elizabeth Warren, D-Mass., told Stumpf during his appearance before the Senate Banking, Housing and Urban Affairs Committee in Washington.
“You should give back the money you took while this scam was going on, and you should be criminally investigated by the Department of Justice and the Securities and Exchange Commission,” Warren said.
Stumpf was called to the hearing, which lasted nearly five hours, after the San Francisco-based bank reached a $185 million settlement with federal regulators and the Los Angeles city attorney’s office on Sept. 8.
Wells Fargo was accused of creating approximately 2 million fake accounts, including deposit accounts and credit card accounts — often without customers’ knowledge — in order to meet aggressive sales goals.
About 5,300 employees were fired in connection with the scandal, which was first uncovered by the Los Angeles Times in 2013.
Warren’s attack was the most searing but lawmakers on both sides of the aisle hammered away at the accountability of Stumpf and other top executives of Wells Fargo for letting the fraudulent activities spread — and for placing the blame on lower-level employees.
Stumpf, who received $19.3 million in compensation last year, apologized and said he was accountable for the scandal, but that wasn’t good enough for Warren and some other senators.
“You haven’t resigned,” Warren said. “You haven’t returned a single nickel of your personal earnings. You haven’t fired a single senior executive.
“Instead, evidently your definition of accountable is to push the blame to your low-level employees who don’t have the money for a fancy PR firm to defend themselves,” she continued. “It’s gutless leadership.”
Sen. Bob Menendez, D-N.J., called it “despicable” that Wells Fargo has “laid the blame on low-paid retail bank employees.”
He painted a picture of a low-paid bank worker, pushed by a hard-driving boss, simply trying to stay employed in the face of Wells Fargo’s now notoriously tough sales goals.
“In essence, this is about losing your job,” Menendez said. “You think that’s the appropriate environment for protecting your customers?”
Multiple senators wanted to know whether Stumpf believed Wells Fargo should rescind, or “claw back,” some of the compensation owed to Stumpf and Carrie Tolstedt, the longtime executive who ran the bank’s consumer banking unit that oversaw many of the sales practices.
But Stumpf dodged their questions several times, saying he was “not an expert in compensation” and would leave questions about Tolstedt’s pay to a committee on Wells Fargo’s board.
Tolstedt announced her retirement in July after amassing salary, bonuses, stock, options and other compensation totaling $124.6 million in her career, Fortune reported, although others placed the figure in the mid-$90 million range.
“Are you going to look into this seriously about what this person did, her responsibility and the big reward that she’s getting?” Sen. Richard C. Shelby, R-Ala., chairman of the committee, asked Stumpf.
Stumpf said he is not a member of the board’s compensation committee and would not recommend a clawback for Tolstedt. The committee is independent, Stumpf said, and “I don’t want to prejudice their activity.”
“You’re not willing to say publicly … that some of her compensation … should be clawed back?” asked Sen. Sherrod Brown, D-Ohio.
“I’m going to let the process proceed,” Stumpf said.
Stumpf also announced three new initiatives to deal with improper accounts at the bank:
• Wells Fargo is expanding its review of customer accounts to 2009 and 2010. The time frame that was already under review began in 2011.
• The bank “will be contacting every single deposit customer across the country” to determine if accounts were authorized. The bank will use the same process agreed to for California customers in the recent settlements. It will also contact “hundreds of thousands” of customers with open credit cards “about whether they need or want their credit card.”
• Confirmation emails will be sent to customers within one hour of the opening of a new deposit account.
Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group, said Stumpf’s apology was not enough to contain the scandal.
“I think the CEO of Wells Fargo failed to disprove that it was a massive fraud,” said Mierzwinski, who attended the hearing. “No senator believed him.”
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