Wells Fargo CEO John Stumpf Told to Resign by Sen. Warren


Posted on: September 20th, 2016 by ABC News No Comments

Mark Neuling/CNBC/NBCU Photo Bank via Getty Images(WASHINGTON) — Amid tense questioning on Capitol Hill Tuesday morning, Wells Fargo CEO John Stumpf was told by Sen. Elizabeth Warren, D-Mass., that he should resign and face criminal charges amid a scandal over assertions that bank employees opened more than a million accounts with customers’ authorization.

Warren was far from the only senator to criticize the bank chief, with Republicans and Democrats both grilling him for over two hours.

Sen. Jon Tester, D-Mont., said that Stumpf had achieved something that he hadn’t seen in his 10 years on the committee: unity.

“You have done something that’s never happened and united this committee on a major topic…and not in a good way,” Tester told Stumpf.

The hearing is the most public appearance by the embattled CEO since the scandal erupted earlier this month. A second panel will examine regulators’ actions around the scandal.

On Sept. 8, regulators in Washington and California fined the bank $185 million after they said an internal review found that employees had opened or applied for more than two million bank accounts or credit cards without customers’ knowledge or permission between May 2011 and July 2015. The bank confirmed that it had fired some 5,300 employees over the period in connection to the allegations.

While Democratic Senate Banking Committee members were widely expected to grill Stumpf over the allegations, they were joined by their Republican colleagues in repeatedly calling the activity “fraud.”

Warren Tells CEO to Resign

Unsurprisingly, the fiercest language came from Warren, a consumer advocate who has been critical of the nation’s big banks.

Warren, who at times became impassioned, told Stumpf that he should leave his post and face a criminal investigation.

“You should resign,” she said. “You should give back the money that you gained while this scam was going on and you should be criminally investigated by the DOJ and the SEC.”

A Securities and Exchange Commission spokesman, John Nester, told ABC News that the agency “can neither confirm or deny the existence or nonexistence of investigations” that the agency is conducting. A Wells Fargo spokesperson declined to comment.

Executive Pay

Meanwhile, Sen. Bob Corker, R-Tenn., told Stumpf that he would be engaging in “malpractice” if the bank doesn’t “clawback” money that it had paid to executives during the period that the accounts were being opened without customers’ permission.

The salaries and bonuses of Stumpf and other executives, especially Carrie Tolstedt, the former head of the bank’s community banking division whose retirement was announced in July, have become a focus of scrutiny in recent weeks.

Senators have repeatedly cited a figure contained in a report by Fortune magazine on Sept. 12, which claims that Tolstedt will leave the bank “with $124.6 million in stock, options, and restricted Wells Fargo shares.”

The bank did not immediately return a request for comment on the figure.

The ability to “clawback” the compensation does appear to be a viable option, with Stumpf telling the panel that “the Wells Fargo Board…has the tools to hold senior leadership accountable, including me and Carrie Tolstedt, the former head of our retail banking business.”

Additionally, in a filing with the SEC earlier this year and reviewed by ABC News, the bank said that it had “strong recoupment and clawback policies in place, designed [to] discourage our executives from taking imprudent or excessive risks.”

“I want to be clear on this: I will respect and accept the decision of the Board,” Stumpf told senators Tuesday.

Many senators, however, were incensed when he later deferred to the board if any actions would be taken. Stumpf is the board’s chairman.

Who’s to Blame?

Corker was just one of several Republicans who were critical of Stumpf and Wells Fargo.

Sen. Jerry Moran, a Republican from Kansas, told the CEO that he should stop scapegoating low-level employees for the alleged misconduct.

“I’m not scapegoating, but that is not part of our culture,” Stumpf responded.

Last week, in an interview with The Wall Street Journal, Stumpf reportedly attributed blame for the opening of the accounts on employees.

During the Senate hearing Tuesday, he said that he had been misunderstood during that interview.

Throughout the hearing, he seemed to try and shift blame to the bank’s product sales goals program, which will no longer be in practice beginning Jan. 1, 2017.

He said that “we should have done more sooner to eliminate unethical conduct or incentives that may have unintentionally encouraged that conduct.”

In his opening remarks, Stumpf also took time to thank the “268,000 team members” who work for the bank.

The Senate hearing is the latest development in the scandal that has engulfed the bank in recent weeks.

The allegations originally came to light when the Consumer Financial Protection Bureau (CFPB) fined the bank $100 million — the largest fine the agency has ever handed down, according to the agency’s director. The office of the comptroller of the currency slapped the bank with a $35 million fine, and the county and city of Los Angeles fined it another $50 million.

At the time, the bank said that it regretted and took responsibility for “any instances where customers may have received a product that they did not request.”

The bank has fired some 5,300 over the approximate five-year period in connection to the allegations; however, it sought to downplay the terminations with an official telling ABC News that “the number terminated represents about one percent of this workforce over the five year period.”

Since then, investigations have been opened by the FBI and federal prosecutors in New York and California, as well as the House of Representatives Financial Services Committee, which will hold a hearing of its own. A date for that hearing isn’t yet known.

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