September 29, 2016 | No Comments
Wells Fargo CEO John Stumpf felt the heat from House lawmakers Thursday, with multiple members of a key panel calling on him to resign and for criminal charges to be brought.
A House Financial Services Committee hearing opened with scathing statements from Chairman Jeb Hensarling and ranking member Maxine Waters. They both told Stumpf this was “just the beginning” of their investigation into the opening of as many as 2 million unauthorized customers’ accounts.
Rep. Mike Capuano (D-Mass.) joked that Stumpf had “brought true bipartisanship to Congress,” with Republicans and Democrats declaring themselves dismayed and outraged and pointing to potential legal violations.
“You think today is tough?” an animated Capuano told Stumpf. “When the prosecutors get a hold of you, you’re going to have a lot of fun.”
“You and your entire leadership team are clearly and unequivocally guilty of at least conspiracy to commit fraud,” he added.
A similarly emphatic Greg Meeks (D-N.Y.) said Wells Fargo has been penalized every year since Stumpf became chairman in 2010. “You’re going to tell me there’s not a culture of something wrong at Wells Fargo?” he asked. “The whole board needs to go if they’re going to allow [you] to be in charge.”
Rep. Brad Sherman (D-Calif.) kept up his drumbeat of criticism that the bank is too big to fail and too big to manage, while skewering the CEO for not informing shareholders sooner about the fraudulent activity.
Stumpf said he was told about the unauthorized practices later in 2013 before the Los Angeles Times published an investigative series in October, because the bank was “seeing an acceleration of this activity.” He said he did not recall who told him.
He acknowledged that in some cases the bank’s conduct could be described as “theft,” though he said he didn’t believe he personally had broken any laws. When asked how far up the chain of command the misconduct went, he said those responsible were branch managers, their own managers, and in at least one instance an area president.
“We’re going to do a complete review of anybody who would’ve been a part of this, and if they were dishonest and broke our code of ethics, they will be held accountable,” he said.
“That kind of behavior is not who I am,” Stumpf said, pointing to his 94-year-old father who is “a wonderful guy, and he’s still a big influence in my life.”
“I try to lead with courage and conviction,” he said. “Our company is based on values of doing what’s right.”
Rep. Randy Neugebauer (R-Texas) questioned whether Stumpf should be allowed to be chairman and CEO simultaneously. Stumpf replied that he has recused himself or not been invited to board meetings that focused on how executives should be held accountable. He said the board is independent.
Stumpf has already been financially affected by the scandal. On Tuesday night, the bank’s board announced that the CEO would give up outstanding unvested equity awards valued at $41 million, lose his bonus for this year and not receive his salary during a board investigation. Former retail banking head Carrie Tolstedt lost equity awards worth about $19 million, as well as her bonus for this year and severance.
But Sen. Elizabeth Warren (D-Mass.) kept up her attack on Wednesday, arguing that the moves “represent only a fraction of the total pay and bonuses” that Stumpf and Tolstedt received during the years that “their compensation was based in part on inflated retail account growth and cross-selling success.”
Warren also joined Sens. Jeff Merkley (D-Ore.) and Bob Menendez (D-N.J.) in calling on the Securities and Exchange Commission to probe whether Wells executives broke laws by “misleading investors and firing whistle-blowers.”
They pointed to investigations by federal, state and local government agencies, according to Wells disclosures. They also cited the Labor Department’s announcement of a “top-to-bottom” review of whether Wells violated any labor standards.
“The SEC should join in these efforts to ensure that Wells Fargo and its senior executives are held accountable for a massive, years-long fraud that hurt thousands of customers and potentially cost investors billions of dollars,” the senators wrote in a letter to SEC Chair Mary Jo White.
There were signs throughout the hearing that Wells Fargo won’t be the only one in the crosshairs. Rep. Mick Mulvaney (R-S.C.) told Stumpf that he was undermining arguments against why banks should be regulated more intensely.
“I can’t tell you how disappointed I am to even have to be here today as one of the many members of this committee who every single day in here defend the banking system, defend capitalism, defend free markets,” Mulvaney said.
“To sit here and have to watch you essentially validate everything that the other side has said about you and your business and your industry, I don’t know, for the last three or four generations, is extraordinarily disappointing to me. The damage that you have done to the market, to your industry, far exceed the damage that you’ve done to your own business.”
Zachary Warmbrodt contributed to this report.