Tags: wells fargo ceo | john stumpf | elizabeth warren | resign

Wells Fargo CEO Should Resign, Face Prosecution, Elizabeth Warren Says

Image: Wells Fargo CEO Should Resign, Face Prosecution, Elizabeth Warren Says

Wells Fargo & Co.’s John Stumpf (AP Images/Jeff Chiu)

Tuesday, 20 Sep 2016 12:49 PM

Wells Fargo & Co.’s John Stumpf should resign, give back his compensation and face criminal prosecution for a scandal in which the bank opened unauthorized accounts for thousands of customers, Senator Elizabeth Warren said.

“So you haven’t resigned, you haven’t returned a single nickel of your personal earnings, you haven’t fired a single senior executive,” the Massachusetts Democrat said Tuesday as the bank’s chief executive officer testified before the Senate Banking Committee.

“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,” Warren said. “It’s gutless leadership.”

Wells Fargo agreed to pay a record $185 million to authorities including the Consumer Financial Protection Bureau after a review found employees may have opened more than 2 million accounts and credit cards without consumers’ permission. Stumpf, 63, told lawmakers he was “deeply sorry” and detailed a five-year timeline of attempts the bank made to deter misconduct.

Warren told Stumpf he should “give back the money you took while this scam was going on and you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission.”

The lender is also contacting all of its customers nationwide to ensure their accounts and credit cards are products they need and want, said Stumpf, who is also the bank’s chairman.

“The Wells Fargo board is actively engaged in this issue,” Stumpf said. “The board has the tools to hold senior management accountable, including me and Carrie Tolstedt, the former head of our retail banking business. Any board actions taken with our named executive officers will be appropriately disclosed, and I want to be clear on this, I will respect and accept the decision of the board.”

Stumpf is under political pressure to punish senior managers, such as calls by Warren to claw back millions of dollars in pay from Tolstedt.

Unpaid Leave

The bank had announced in July that Tolstedt was retiring. On Monday, it said Claudia Russ Anderson, who had overseen risk in the retail banking unit, is taking a six-month unpaid leave for personal reasons.

“Carrie chose to retire,” Stumpf said, adding that he and Chief Operating Officer Tim Sloan told her the bank wanted “to go in a different direction.” She was eligible for retirement “and she decided to retire” after that conversation, Stumpf said.

Senator Sherrod Brown, an Ohio Democrat, told the CEO that the bank’s response has been inadequate, and said, for example, that Wells Fargo hasn’t yet calculated what effect lower credit scores resulting from the fake accounts might have had on customers’ finances. Senior management downplayed the importance of the problem and continued to award performance bonuses to those involved as recently as two months ago, Brown said.

“You would think the lessons of the financial crisis, which came at such a high cost to our country, would change the way banks do business,” Brown said.

Other witnesses Tuesday include U.S. Comptroller of the Currency Tom Curry, who said in prepared remarks that he’s directing bank examiners to review sales practices at all “large and mid-size banks,” and that the agency could pursue its own enforcement action against people at Wells Fargo. CFPB Director Richard Cordray also was scheduled to speak.

Employee Dismissals

Stumpf, who testified with a bandaged right hand the firm said he injured while playing with his grandchildren, provided a timeline of the bank’s own investigation into the matter. In 2011, a dedicated team began to monitor and root out improper sales. The firm started terminating roughly 1,000 of its 100,000 retail banking employees annually for violations. By 2012, the lender began lowering some sales goals for compensation.

In 2015, an OCC review of Wells Fargo’s sales practices revealed shortcomings that prompted the agency to demand changes -- including telling the bank to compensate customers for any harm suffered. The company had to bring in an outside consultant, Curry said. Wells Fargo hired PricewaterhouseCoopers in August 2015 to help determine whether customers were hurt, according to Stumpf.

The CEO outlined other ways Wells Fargo has tried to prevent unauthorized accounts from being created, including working with regulators and creating a new branch compliance program.

A group of Democratic Senators, led by Warren, last week wrote a letter pressing Stumpf with questions on pay. The lawmakers singled out Tolstedt, writing that there appears “to be multiple grounds on which to trigger the clawback provisions to recoup some or all of Ms. Tolstedt’s incentive rewards.”

The House Financial Services Committee, led by Chairman Jeb Hensarling, said last week it also plans to conduct its own investigation and will hold a separate hearing later this month. Hensarling, a Texas Republican, said he plans to request that Stumpf appear for that hearing, too. Tolstedt as well as other corporate officers will be called for transcribed interviews, the lawmaker said.

 

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Wells Fargo's John Stumpf should resign, give back his compensation and face criminal prosecution for a scandal in which the bank opened unauthorized accounts for thousands of customers, Senator Elizabeth Warren said.
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Tuesday, 20 Sep 2016 12:49 PM
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