New Wells Fargo probe is sought
Shareholders call for a broader investigation into the bank’s fake-accounts scandal.
A San Francisco banking advocacy group, several religious organizations and a Rhode Island pension fund want Wells Fargo to provide a broader accounting of what led to widespread fraud in the bank’s sales practices.
The groups, all Wells Fargo shareholders, plan to ask fellow shareholders to vote for the production of a comprehensive report “on the root causes of the fraudulent activity” and the steps the bank has taken to address the problems, according to the bank’s annual proxy statement, filed Wednesday.
This type of shareholder proposal rarely wins approval from a majority of shareholders, and Wells Fargo’s board is urging shareholders to vote against the proposal, saying it’s already investigating the scandal and has taken a variety of measures to stamp out bad behavior, according to the filing. Still, if a large enough bloc of shareholders support the proposal, it could push the bank’s board to provide more information.
“Even if a corporation doesn’t have to listen to the shareholder proposal, it may motivate the company to act and be more transparent,” said Steven Bank, a professor of business law at UCLA.
The shareholders calling for the report include the Sisters of St. Francis of Philadelphia, the Board of Pensions of the Presbyterian Church and other religious organizations — as well as Rhode Island’s state pension fund, investment firm Boston Trust and the California Reinvestment Coalition, a group that advocates for more lending and bank services in minority and low-income neighborhoods.
“Investors and customers still do not have a clear understanding of the scope of the fraud or the strategies in place to address it in order to determine whether they are sufficient to prevent future lapses,” the groups wrote in their proposal.
The bank last September acknowledged that its employees opened as many as 2 million checking, savings and credit card accounts without customer authorization over the last several years and agreed to pay $185 million to regulators to settle investigations into its sales practices.
The practices were first disclosed in a 2013 Los Angeles Times article.
The bank’s former chairman and chief executive, John Stumpf, resigned in October after lawmakers pilloried him and the bank during two Capitol Hill hearings.
But neither the settlements nor subsequent resignations and firings of bank executives have contained the scandal, which has sharply diminished new consumer account openings over the last several months.
Several federal and state agencies have opened their own investigations into the bank’s practices, looking for evidence of criminal identity theft, violations of labor law and other possible failings. And the bank said in a recent regulatory filing that the number of customers affected by the sales practices might be higher than first reported.
The shareholders’ proposal asks the bank to commission a comprehensive report to be sent to shareholders by October detailing how the scandal has affected the bank, how bank practices have been or will be improved, and how the bank plans to rebuild trust with regulators, customers and shareholders.
“Shareholders believe a full accounting of the systemic failures allowing these unethical practices to flourish are critical to rebuilding credibility with all stakeholders,” the groups wrote in their proposal.
In Wednesday’s filing, the bank’s board advised shareholders to vote against the proposal, saying the bank has already taken steps to explain what happened and prevent future scandals.
“Our board believes that an additional report is not necessary and, therefore, recommends a vote against this proposal,” according to the filing.
The company noted that its report on the results of the bank’s internal investigation will be released prior to its upcoming annual shareholder meeting, scheduled for April 25 at a resort outside of Jacksonville, Fla.
Shares of Wells Fargo, which have recovered since a steep drop in September, closed Wednesday at $58.71, down 5 cents.