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Citing ‘Gutless Leadership,’ Senator Denounces Wells Fargo’s John Stumpf Illegal Activity at Wells Fargo May Have Begun Earlier, Chief Says
(35 minutes later)
WASHINGTON — New and illuminating details about the widespread misconduct uncovered at Wells Fargo — where bankers opened secret and unauthorized credit card and deposit accounts for customers for at least five years, in an attempt to meet sales goals — were divulged on Tuesday as members of the Senate Banking Committee pressed John Stumpf, the chief executive of Wells Fargo, for explanations. WASHINGTON — The chief executive of Wells Fargo — where bankers opened secret and unauthorized credit card and deposit accounts for customers for at least five years in an attempt to meet sales goals — told a Senate panel Tuesday morning that the illegal activity might have gone on even longer and that no senior executives had been fired as a result.
Although the bank has traced the illegal account openings to 2011, the bank is investigating whether they may have begun even sooner, Mr. Stumpf told the panel. The executive who oversaw the retail bank, Carrie Tolstedt, was permitted to retire in July rather than be held accountable for the problems, Mr. Stumpf acknowledged. Senators on both sides of the aisle expressed anger and indignation at the chief executive, John G. Stumpf, with several lawmakers calling for him to give back some of his rich compensation.
Although the bank has traced the illegal account openings to 2011, it is investigating whether they may have begun even sooner, Mr. Stumpf told the Senate Banking Committee. The executive who oversaw the retail bank, Carrie Tolstedt, was permitted to retire in July rather than be held accountable for the problems, Mr. Stumpf acknowledged.
He defended that decision by saying that the responsibilities of her job included much more than just account openings.He defended that decision by saying that the responsibilities of her job included much more than just account openings.
But the senators seemed unmoved by Mr. Stumpf’s attempts to explain why more senior bank executives had not been tied to the widespread illegal sales activity. Bank employees may have opened as many as two million accounts in customers’ names without their knowledge.But the senators seemed unmoved by Mr. Stumpf’s attempts to explain why more senior bank executives had not been tied to the widespread illegal sales activity. Bank employees may have opened as many as two million accounts in customers’ names without their knowledge.
Senator Elizabeth Warren, a Massachusetts Democrat, said the illegal sales were a big driver of Wells Fargo’s success as one of the nation’s most profitable banks. She called on Mr. Stumpf to resign and for him to be criminally investigated.Senator Elizabeth Warren, a Massachusetts Democrat, said the illegal sales were a big driver of Wells Fargo’s success as one of the nation’s most profitable banks. She called on Mr. Stumpf to resign and for him to be criminally investigated.
“Have you returned one nickel of the money that you earned while this scandal was going on?” asked Ms. Warren, who helped create the Consumer Financial Protection Bureau, which imposed its largest penalty ever on Wells for the sham accounts. “Have you returned one nickel of the money that you earned while this scandal was going on?” asked Ms. Warren. She helped create the Consumer Financial Protection Bureau, which imposed its largest penalty ever on Wells Fargo for the sham accounts.
“Have you have fired any senior management, the people who actually oversaw this fraud?” Ms. Warren continued. “Have you fired any senior management, the people who actually oversaw this fraud?” Ms. Warren continued.
“No,” Mr. Stumpf replied.“No,” Mr. Stumpf replied.
Ms. Warren added: “Your definition of accountability is to push this on your low-level employees. This is gutless leadership.”Ms. Warren added: “Your definition of accountability is to push this on your low-level employees. This is gutless leadership.”
More than 5,300 employees have been fired for the unethical sales since 2011, but they have been mostly lower-ranking workers, including many who say they felt pressured to bend the rules to meet the bank’s aggressive sales goals.More than 5,300 employees have been fired for the unethical sales since 2011, but they have been mostly lower-ranking workers, including many who say they felt pressured to bend the rules to meet the bank’s aggressive sales goals.
Under intense questioning from both Democrats and Republicans, Mr. Stumpf said the bank employees who were terminated included “managers, and managers of managers, and an area president.” When pressed, Mr. Stumpf said other executives who had been held accountable included people involved in risk and “sales efficacy,” but he did not name them. Under intense questioning from both Democrats and Republicans, Mr. Stumpf said the bank employees who were terminated included “managers, and managers of managers, and an area president.”
When pressed, Mr. Stumpf said other executives who had been held accountable included people involved in risk and “sales efficacy,” but he did not name them.
Mr. Stumpf, 63, arrived at the committee room shortly before 10 a.m. flanked by a large number of bank employees. His right hand was wrapped in a large bandage. He read five pages of prepared testimony before taking questions from the panel.Mr. Stumpf, 63, arrived at the committee room shortly before 10 a.m. flanked by a large number of bank employees. His right hand was wrapped in a large bandage. He read five pages of prepared testimony before taking questions from the panel.
For nearly two hours, he was criticized by lawmakers who said he was offering platitudes about his willingness to take responsibility for the illegal sales while escaping any real consequences.For nearly two hours, he was criticized by lawmakers who said he was offering platitudes about his willingness to take responsibility for the illegal sales while escaping any real consequences.
Mr. Stumpf also acknowledged for the first time since the scandal erupted on Sept. 8 that the illegal account sales were one reason the former head of community banking, Ms. Tolstedt, left the bank in July. Despite the widespread unethical sales in the community banking unit, Ms. Tolstedt was not fired but was allowed to retire, Mr. Stumpf said. Mr. Stumpf also acknowledged for the first time since the scandal erupted on Sept. 8 that the illegal account sales were one reason that the former head of community banking, Ms. Tolstedt, left the bank in July.
Ms. Tolstedt received a retirement package that may amount to more than $100 million. When asked by Senator Richard Shelby, an Alabama Republican and the committee’s chairman, whether the huge sums that Ms. Tolstedt was paid when she left the bank should be clawed back, Mr. Stumpf said that such a decision should be left to the bank’s board. Despite the widespread unethical sales in the community banking unit, Ms. Tolstedt was not fired but was allowed to retire, Mr. Stumpf said.
“I am not part of that process. I want to make sure nothing I say will prejudice their process,” said Mr. Stumpf, who is the chairman of the board. Ms. Tolstedt received a retirement package that may amount to more than $100 million. Asked by Senator Richard C. Shelby, an Alabama Republican and the committee’s chairman, whether the huge sums that Ms. Tolstedt was paid when she left the bank should be clawed back, Mr. Stumpf said that such a decision should be left to the bank’s board.
Mr. Stumpf also suggested that the board was also considering whether he should also lose some of his compensation, which last year totaled more than $19 million. “I am not part of that process. I want to make sure nothing I say will prejudice their process,” said Mr. Stumpf, who is the board’s chairman.
Mr. Stumpf also suggested that the board was considering whether he should also lose some of his compensation, which last year totaled more than $19 million.
Given the public outcry over the phony accounts, Senator Bob Corker, a Tennessee Republican, said it would be “malpractice” if the bank did not claw back executive compensation.Given the public outcry over the phony accounts, Senator Bob Corker, a Tennessee Republican, said it would be “malpractice” if the bank did not claw back executive compensation.
Mr. Stumpf said the bank had found evidence that employees were creating sham accounts as far back as 2011, but the problems did not come to his attention or that of the bank’s board until 2013. He said Wells Fargo was now investigating whether the illegal sales went back as far as 2009.Mr. Stumpf said the bank had found evidence that employees were creating sham accounts as far back as 2011, but the problems did not come to his attention or that of the bank’s board until 2013. He said Wells Fargo was now investigating whether the illegal sales went back as far as 2009.