John G. Stumpf, Wells Fargo Chairman and CEO, testified before Senate to answer for 2 million fake accounts in the names of existing customers without their knowledge and permission. Senator Elizabeth Warren criticized Stumpf for not leaving his post and not assuming the responsibility of the scandal. He instead blamed the bank’s low-level employees and fired them.

The fraud was known since 2013, but it was recognized by Wells Fargo in 2015. Mr. Stumpf has repeatedly said he is accountable, yet, he has not resigned and has not returned any of the money the bank made with the fake accounts. Stumpf apologies were not believed by many and even when Wells Fargo is going to pay a $185 million fine to the Consumer Financial Protection Bureau; the Justice Department is reportedly conducting its investigation.

John Stumpf, chairman and CEO of the Wells Fargo & Company, is sworn in prior to testifying before the Senate Banking, Housing and Urban Affairs Committee September 20, 2016 in Washington, DC. Image Credit: Win McNamee/Getty Images/Forbes

Wells Fargo bankers opened more than 2 million fake accounts in the names of existing customers and others in a desperate attempt to reach the bank’s demanding goals: eight accounts per customers. The fake accounts were created without the knowledge nor the permission of the customers and, to make the situation even more outrageous, Wells Fargo stonewalled their client’s inquiries and complaints.

The worst thing is that Mr. Stumpf did not answer how Wells Fargo is going to calculate the real damage done to the customers. Those who had fake accounts opened under their name could be marred because of fraudulent credit card accounts. Wells Fargo bankers stole money from their customers checking accounts to fund the secretly opened accounts, and some of the victims may have bounced payments on bills because of that, Los Angeles Times reports.

Stumpf said the bank has been refunding fees charged to fake accounts, but he did not mention what is going to happen to those who could be facing decades of higher mortgage or loan payments. Lenders downgraded their creditworthiness based on the fake accounts, and Wells Fargo CEO dodged the questions regarding the consequences they might face because of his incompetence.

Even when the bankers were the ones that opened the fraudulent accounts, Stumpf is being held responsible because, under his management, Wells Fargo was demanding employees to cross-sell products to reach the unreasonable goal of eight accounts per customer.

Low-level bankers had to push credit cards, personal loans and other deals to reach their quota to keep their job. Around 5,300 employees have been fired since the fake accounts issue was made public.  

Empty apologies: Wells Fargo hypocrisy 

Wells Fargo has always boasted to investors of its cross-selling success but never mentioned what was behind that achievement. Stumpf denied that the company’s culture was the core problem behind the scandal, which Sherrod Brown (D-Ohio), Committee ranking member, has tagged as a fraud. “I call it fraud because I got tired of euphemisms,” he said.

Wells Fargo did not take seriously the damages it made to their customers until the bank started to be in the loop of regulators. The fraudulent accounts were known since 2013, but Stumpf touted the bank’s decision to hire consultants to help determine the scope of the problem.

After two years of knowing there was a problem, Wells Fargo CEO finally hired consultants at PricewaterhouseCoopers to face the problem. Still, the main problem with the fake accounts were the employees, and not the executives supervising them.

John Stumpf’s  weak efforts to try to solve the problem are the central premise of Senator Elizabeth Warren’s  accusations towards Wells Fargo CEO and compared him to Wall Street executives and their wrongdoing back in 2008.

US Senator Elizabeth Warren, Democrat of Massachusetts, holds up copies of Wells Fargo earnings call transcripts as she questions John Stumpf, chairman and CEO of Wells Fargo, as he testifies about the unauthorized opening of accounts by Wells Fargo during a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill in Washington, DC, September 20, 2016. Imahe Credit: Saaul Loeb/AFP/Getty Images.

Senator Elizabeth Warren had no mercy when questioning Stumpf

During the hearing, Stumpf offered apologies and said one more time he accepted the responsibility “for all unethical sales practices” in the bank’s retail banking business. But his words do not match his actions. Sen. Elizabeth Warren emphasized the hollowness of his statements.

She asked Wells Fargo Chairman and executive what he has actually done to answer to the fraud of the fake accounts. Waren immediately asked Stumpf if he had resigned as CEO or chairman of the bank in question.

Mr. Stumpf started to answer “The board…” but Senator Warren interrupted him and asked him again if he had resigned to his posts. Stumpf said no.

Sen. Elizabeth Warren then asked him if he had returned the millions of dollars stolen during the fraud. But Stumpf started to redirect the blame saying the fake accounts were opened by 1 percent of Wells Fargo personnel and- He was interrupted again by the Senator.

She made it clear that his answer did not respond to her question and claimed her question was about responsibility and continued saying: “Have you returned one nickel of the million of dollars that you were paid while this scam was going on?”

Stumpf tried to dodge the question saying the board would take care of that, but Sen. Warren insisted and asked him again the previous question. Wells Fargo CEO tried to repeat that the board would take care of that but Warren interrupted him and said she would take that as a ‘no.’

Senator Warren exposed that the bank has not fired a single senior executive over the scam, and has not returned any money of Stumpf personal money.

Based on that, Warren criticized the CEO for repeatedly saying hi will be accountable for the damages and yet, not being held responsible. Instead, low-level employees have been blamed, who do not have the money to hire “a fancy PR firm to defend themselves.” Sen Warren called it gutless leadership.

“You should resign. You should give back the money that you took while this scam was going on, and you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission,” Warren concluded.

Source: Los Angeles Times