Wells Fargo CEO John Stumpf apologized to customers for more than 2 million fake accounts opened in their names, but denied any orchestrated fraud by bank management.
In testimony to the Senate Banking Committee Tuesday, Stumpf also said the bank plans to expand the internal review of accounts and refund process by two years, starting in 2009 now.
He addressed the outrage over Carrie Tolstedt, the head of the division where the fake accounts were created who is set to walk away with $124 million in stocks and options, when she retires later this year. Stump indicated Tolstedt was pushed out after the bank determined she “did not do enough” to fix issues in the retail bank.
Stumpf also suggested that the Wells Fargo board, in an independent process, will consider possible clawbacks of her her compensation.
“The board has the tools to hold senior management accountable, including me and Carrie Tolstedt,” Stumpf said.
The Wells Fargo CEO said the scandal pains him more than any problem faced by the bank in his 35 years there, and that he accepts responsibility.
“I am deeply sorry that we failed to fulfill our responsibility to our customers, to our team members, and to the American public,” he said in his prepared remarks.
“I do want to make very clear that there was no orchestrated effort, or scheme as some have called it, by the company,” he said.
Wells Fargo employees have said they were pressured to meet unrealistic sales goals and that they opened the bogus accounts so they wouldn’t lose their jobs.
Stumpf said the fake accounts cost the bank both money and satisfied customers. He said the scandal goes against “our values, ethics and culture and runs counter to our business strategy.”
Wells Fargo also said it will now alert every single deposit customer to review their accounts and shut down ones they don’t want or recognize. Previously the bank had only agreed to do that for its California customers, as part a settlement with Los Angeles.
Further, Wells Fargo said it has begun contacting hundreds of thousands of customers with open credit cards to confirm they need or want their card.
Stumpf has refused to step down, despite calls for him to do so.
Elizabeth Warren, (D-Massachusetts) unleashed a verbal barrage at Stumpf, calling the embattled bank boss “gutless” and demanding he step down.
“You should resign…You should be criminally investigated,” Warren told Stumpf during a fiery one-sided exchange at the Senate Banking Committee’s Wells Fargo hearing.
Warren, a vocal critic of big banks like Wells Fargo, demanded both the Department of Justice and SEC criminally investigate Stumpf for his “gutless leadership.” Last week, a U.S. official told CNN that the DOJ has issued subpoenas to Wells Fargo.
Warren’s diatribe was the most forceful condemnation yet of Wells Fargo over the millions of fake accounts that the bank created over several years and 5,300 employees that were fired over several years.
The Wells Fargo CEO seemed caught off guard by the intensity of Warren’s comments and was barely able to get a word in.
Warren slammed Stumpf for failing to fire any senior executives linked to the scandal, while Wells Fargo’s aggressive sales tactics helped pump up the bank’s stock price.
She said Stump’s personal holdings of Wells Fargo stock increased by more than $200 million while the fake accounts “scam” was going on, thanks in part to the bank’s success in selling tons of products to customers that they didn’t need.
“You squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket,” Warren said.
Analysts believe lawmakers may take the hearing as an opportunity to pressure the Justice Department to prosecute senior Wells Fargo executives for fraud. The Justice Department has issued subpoenas to Wells Fargo over the scandal, a U.S. official told CNN last week.
“There is tremendous pressure on Justice to bring criminal charges against bankers. That is why the stakes are so high here for Wells Fargo,” Jaret Seiberg, an analyst at Cowen & Company wrote.