Wells Fargo CEO: 'Sorry' but it wasn't a 'scheme'

WASHINGTON—Wells Fargo (WFC) CEO John Stumpf apologized on Tuesday for the bank's opening of millions of secret accounts without customers' permission but argued that it was not part of an "orchestrated" scheme and refused to push for a clawback of executive compensation, including his own.

Facing pressure from senators to relinquish past pay after his company opened more than 2 million fake accounts, Stumpf told the Senate Banking Committee that Wells Fargo has implemented measures to overhaul its sales culture. He also announced that the company would expand its internal review of the scandal to include 2009 and 2010 after previously investigating the matter back to 2011.

He said he did not learn of the scandal until around the time the Los Angeles Times published a report on the matter in 2013.

"I am deeply sorry that we failed to fulfill our responsibility to our customers, to our team members, and to the American public," Stumpf said. "I have been with Wells Fargo through many challenges — none that pains me more than the one we will discuss this morning."

In an unusually bipartisan chorus of criticism, committee members blasted Stumpf for failing to stop the Wells Fargo practice even if he did not personally know about it from the beginning.

The company has come under fire for providing incentives to retail bankers to "cross-sell" products to its customers, which critics say encouraged employees to open accounts without permission to meet aggressive internal targets.

Stumpf defended the company's cross-selling strategy, saying it fosters "deep relationships" that bolsters the company and helps customers "succeed financially."

"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. "We never directed nor wanted our employees, whom we refer to as team members, to provide products and services to customers they did not want or need."

The company has fired some 5,300 employees, or about 2% of its current workforce, over the fake accounts and has eliminated quotas for bankers, branch managers and district managers starting Jan. 1.

U.S. Sen. Bob Corker, R.-Tenn., said it would be "malpractice" for Wells Fargo not to claw back compensation from Stumpf and former community banking chief Carrie Tolstedt, recently announced plans to retire by the end of the year but will still own Wells Fargo stock worth tens of millions of dollars.

Stumpf said he would defer to a Wells Fargo board committee responsible for executive compensation on whether to claw back any pay. But he lauded Tolstedt's performance on other key measures.

Sen. Elizabeth Warren, D-Mass., who has made anti-Wall Street measures a centerpiece of her political agenda, excoriated Stumpf, saying he should resign and be "criminally investigated" for allowing Wells Fargo to perpetuate a "massive fraud."

"It's gutless leadership," she said, comparing Stumpf to Wall Street executives who escape prosecution for wrongdoing while ordinary retail employees are jailed for stealing from the cash register.

Stumpf stayed mostly on message throughout the hearing but bristled at Warren's characterization of the company's missteps. "I disagree with the fact that this is a massive fraud," he said.

Tolstedt's employment and compensation served as red meat for the committee.

"Did you consider firing her?" Warren asked.

"No," Stumpf repliied.

"Seriously?!" Warren responded, incredulously.

Sen. Sherrod Brown, D-Ohio, joined the chorus of senators calling for Wells Fargo executives to lose bonuses. "Workers lost their jobs with no parachute of any color," he said.

Wells Fargo agreed to a $185 million penalty as part of a civil settlement announced Sept. 8. It has acknowledged unauthorized accounts were opened from 2011 through 2015, racking up $2.6 million in fees that have since been refunded to affected customers.

"Wrongful sales practice behavior goes entirely against our values, ethics, and culture and runs counter to our business strategy of helping our customers succeed financially and deepening our relationship with those customers," Stumpf said.

"That said, I accept full responsibility for all unethical sales practices in our retail banking business, and I am fully committed to doing everything possible to fix this issue, strengthen our culture, and take the necessary actions to restore our customers’ trust."

Whether sales incentives have a corrosive effect on business integrity is a matter that clearly needs more attention, regulators said.

"Unchecked incentives and an unrealistic and uncaring culture of high-pressure sales targets can lead to serious consumer harm," said Richard Cordray, director of the Consumer Financial Protection Bureau. "Incentive compensation structures are common in businesses and they can motivate positive behavior. Yet companies need to pay close attention to their compliance monitoring systems in order to prevent violations of the law and abusive practices."

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.


JOIN THE CONVERSATION

To find out more about Facebook commenting please read the
Conversation Guidelines and FAQs

Leave a Comment