House lawmakers heap blistering criticism on Wells Fargo CEO
Washington — Angry lawmakers heaped another round of blistering criticism on Wells Fargo’s CEO, pressing Thursday for details about what senior managers knew about allegedly illegal sales practices and when any concerns were disclosed.
Chief Executive John Stumpf, newly stripped of tens of millions in compensation, told the House Financial Services Committee that the bank is expanding its review of accounts and will evaluate executives’ roles. But as during the grilling he received last week from a Senate panel, Stumpf remained on the defensive.
Several lawmakers, both Republican and Democrat, alleged that Wells Fargo’s sales practices may have violated federal laws, including the federal racketeering laws, which would constitute a criminal offense. Federal regulators have not said if they have referred the Wells Fargo case to the Department of Justice.
“Fraud is fraud. Theft is theft,” committee head Rep. Jeb Hensarling, R-Texas, told Stumpf.
Stumpf reiterated his words of last week, that he was “deeply sorry.” He said the bank was looking at accounts further back, to 2009, and that bank executives’ roles will be reviewed “across the board” in an inquiry by Wells Fargo’s outside directors.
U.S. and California regulators have fined San Francisco-based Wells Fargo $185 million, saying bank employees trying to meet sales targets, opened up to 2 million fake deposit and credit card accounts without customers’ knowledge. Regula-
tors said they issued and activated debit cards, and signed people up for online banking without permission. The abuses are said to have gone on for years, unchecked by senior management.
Stumpf came under a sustained assault from lawmakers, who face re-election in a little over a month. He insisted that Wells Fargo had taken actions prior to 2013 to bolster its legal compliance and maintain high ethical standards. He bristled at depictions of the culture of Wells Fargo — a bank with origins in the California gold rush — as elevating sales and profits at the expense of ethics.
“This is the behavior of people that we found, that we did not want,” Stumpf insisted.
For many of the angered lawmakers, the scandal is personal. They hold accounts with Wells Fargo or have taken out mortgages. “If I could, I’d pay it back,” said Hensarling.
Republican Rep. Patrick McHenry, who represents North Carolina — where Wells has a large presence due to its purchase of Wachovia in 2008 — was particularly incensed. “You have broken long-standing ethical standards inside the company.” McHenry said.
Stumpf noted new leadership at the retail bank business and the accelerated elimination of sales goals. He said about 10 percent of the 5,300 fired employees were branch managers, while others terminated were above that level, supervising the branch managers.
He also cited the compensation he must return. The Wells Fargo board said it is stripping Stumpf and the executive who ran the retail banking division of millions of dollars in pay. Stumpf, who earned $19.3 million last year, will forfeit $41 million in stock awards.
He also is giving up any bonuses for this year, as is Carrie Tolstedt, the former head of the retail operation. Tolstedt is forfeiting $19 million of her stock awards, and her planned departure was made immediate.
Members of Congress also raised questions as to whether other banks had similar toxic sales cultures like Wells. “We have Wells Fargo before me, but I don’t think you should be alone in this joyous experience,” said Rep. Brad Sherman, D-California.
Stumpf insisted customers’ loyalty to Wells Fargo remains as strong as ever. He also defended his dual roles as chief executive and chairman, positions that some critics have suggested should be split.
Members of Congress also pushed Stumpf on when he informed Wells Fargo’s board about the sales practice scandal, and whether Wells may have violated Securities and Exchange Commission regulations by not informing investors.