Wells Fargo May Have Illegally Opened Unauthorized Accounts Even Sooner Than Previously Thought

CEO stated that no senior executives have been fired and that he knew about the practice for years

Wells Fargo May Have Illegally Opened Unauthorized Accounts Even Sooner Than Previously Thought
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September 21, 2016

Wells Fargo Chief Executive John G. Stumpf admitted to a Senate panel that the bank's illegal activity may have gone on longer than previously thought and that no senior executives have been fired as a result of the practice.

The Senate Banking Committee comprised lawmakers from both parties, says The New York Times (NYT). Many senators expressed anger and indignation at Stumpf and called for him to return some of the compensation he had received during the years the unauthorized accounts were open.

Stumpf explained that Wells Fargo has traced the practice to 2011 so far and is investigating whether it may have begun even before that time. He acknowledged that the executive who had managed the bank, Carrie Tolstedt, had been allowed to retire in July rather than be held accountable. He claimed that her position had many other responsibilities in addition to account openings.

The senators did not seem swayed by this explanation. Wells Fargo employees allegedly opened up to two million accounts in customers' names without the knowledge or consent of those customers.

Senator Elizabeth Warren believes that profits from those illegal sales were one of the main forces behind Wells Fargo's success as one of the most profitable banks in the U.S. She called for Stumpf's resignation and a criminal investigation into his actions. Senator Warren helped establish the Consumer Financial Protection Bureau, which penalized the bank $100 million for the illegal accounts.

"Have you returned one nickel of the money that you earned while this scandal was going on?" she asked. "Have you fired any senior management, the people who actually oversaw this fraud?"

"No," responded Stumpf.

Senator Warren then continued, "Your definition of accountability is to push this on your low-level employees. This is gutless leadership."

More than 5,300 Wells Fargo employees have been fired over the illegal activity, but most of them were employed at the lower ranks where they felt pressured to open the accounts in order to meet the aggressive sales goals imposed by the bank.

Stumpf was intensely questioned by senators on both sides of the aisle, stating that the fired employees included "managers, and managers of managers, and an area president." He said that other employees had been held accountable, including people who were involved in risk and "sales efficacy." He did not name these employees.

NYT reports that the senators felt that Stumpf was "offering platitudes about his willingness to take responsibility for the illegal sales while escaping any real consequences."

For the first time since the scandal broke on September 8, however, he did acknowledge that the illegal accounts were one of the reasons for the retirement of the former head of community banking, Tolstedt, in spite of the unethical sales practices that were so widespread in the community banking unit.

Tolstedt's retirement package may have totaled more than $100 million. When asked by Senator Richard C. Shelby where or not that money ought to be clawed back, Stumpf responded that the bank board ought to make that decision.

"I am not part of that process," he said, though he is the chairman of the board. "I want to make sure nothing I say will prejudice their process."

He also claimed that the board was deciding whether or not he should also return some of the money he made, which amounted to more than $19 million in 2015.

Senator Bob Corker stated that it would be "malpractice" if Wells Fargo did not claw back compensation provided to executives given the outrage among the public over the illegal accounts.

Stumpf stated that so far the bank has found evidence indicating that its employees were opening the accounts as long ago as 2011, but that it was 2013 before either he or the board found out about the practice. The bank, he said, is now working to determine whether the practice stretched as far back as 2009.