Wells Fargo CEO grilled over bank ac­count scan­dal

Jamaica Gleaner - - BUSINESS - – AP

THE CEO of Wells Fargo faced ac­cu­sa­tions of fraud and calls for his res­ig­na­tion Tues­day from harshly crit­i­cal se­na­tors at a hear­ing over al­le­ga­tions that bank em­ploy­ees opened mil­lions of ac­counts cus­tomers didn’t know about to meet ag­gres­sive sales quo­tas.

Mem­bers of the Se­nate Bank­ing Com­mit­tee showed bi­par­ti­san out­rage over the lon­grun­ning con­duct, un­sat­is­fied by Chief Ex­ec­u­tive John Stumpf’s show of con­tri­tion.

Stumpf said he was “deeply sorry” that the bank failed to meet its re­spon­si­bil­ity to cus­tomers and did not act sooner to stem “this un­ac­cept­able ac­tiv­ity”. He promised to as­sist af­fected cus­tomers.

Sen­a­tor El­iz­a­beth War­ren flatly told Stumpf he should re­sign. “You squeezed your em­ploy­ees to the break­ing point so they would cheat cus­tomers,” she said. “You should re­sign. You should give back the money you took while the scam was go­ing on.”

The Mas­sachusetts Demo­crat, one of the fiercest crit­ics of Wall Street, also ad­vo­cated for a crim­i­nal in­ves­ti­ga­tion by the Jus­tice De­part­ment and se­cu­ri­ties reg­u­la­tors.

Stumpf, a 34-year vet­eran of Wells Fargo and CEO since 2007, earned US$19.3 mil­lion last year. The bank does have in place pro­vi­sions its board could im­ple­ment to claim back ex­ec­u­tive com­pen­sa­tion.

US$185M FINE

Wells Fargo sales em­ploy­ees, try­ing to meet tar­gets that called for ev­ery cus­tomer to have eight prod­ucts with the bank, opened more than two mil­lion bank and credit card ac­counts, reg­u­la­tors said last week in levy­ing a US$185-mil­lion fine.

Money in cus­tomers’ ac­counts was said to have been moved to th­ese new ac­counts with­out their per­mis­sion. Debit cards were is­sued and ac­ti­vated, as well as PINs cre­ated, with­out Wells Fargo Chief Ex­ec­u­tive Of­fi­cer John Strumpf is sworn in to tes­tify be­fore the Se­nate Bank­ing Com­mit­tee on Capi­tol Hill in Wash­ing­ton on Tues­day.

telling cus­tomers. In some cases, bank em­ploy­ees even cre­ated fake email ad­dresses to sign up cus­tomers for on­line bank­ing ser­vices, the reg­u­la­tors said.

Pep­pered with crit­i­cism for hours, Stumpf at one point stum­bled a bit over his words and bris­tled at War­ren’s sug­ges­tion that the sales prac­tices were a “scam”.

“We recog­nise now that we should have done more sooner,” he ac­knowl­edged. “I am deeply sorry that we have not lived up to our val­ues in this way.” He promised: “I will make it right.”

The se­na­tors asked that he specif­i­cally lay out ac­tion the bank will take to do so. They also chal­lenged as­ser­tions that he and other Wells Fargo se­nior ex­ec­u­tives did not be­come aware of the prob­lems un­til 2013 – when the sales mis­con­duct was re­ported by The Los An­ge­les Times. The prac­tices ap­par­ently be­gan at least in 2009.

Wells Fargo has long been known in the bank­ing in­dus­try for its ag­gres­sive sales goals. Car­rie Tol­st­edt, the for­mer head of the re­tail bank­ing busi­ness, an­nounced in July that she would re­tire from the bank this year. She is ex­pected to leave with as much as US$125 mil­lion in salary, stock op­tions and other com­pen­sa­tion.

‘MAL­PRAC­TICE’

Sen­a­tor Bob Corker of Ten­nessee said it would be “mal­prac­tice” if the bank doesn’t in­sti­tute the com­pen­sa­tion claw­backs, and Stumpf said the board “has the tools to hold se­nior lead­er­ship ac­count­able”, in­clud­ing him­self and Tol­st­edt.

Ques­tioned again by War­ren, Stumpf said the bank had not con­sid­ered fir­ing her.

Un­der the set­tle­ment with reg­u­la­tors, it nei­ther ad­mit­ted nor de­nied the al­le­ga­tions. It later said it plans to elim­i­nate the sales tar­gets by Jan­uary 1. Some 5,300 Wells Fargo em­ploy­ees have been fired.

Stumpf of­fered some de­tail at the hear­ing about who was fired, say­ing “bankers, bank man­agers, man­agers of man­agers, and even an area pres­i­dent.” They ranged in pay from about US$35,000 to US$65,000.

AP

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