Wells Fargo CEO John Stumpf was grilled again by Congress, with members questioning his and the board’s integrity and honesty.
In a repeat of last week’s hearing before the Senate banking committee, Stumpf came under fire from the House Financial Services Committee on Thursday. The panel wasted little time before accusing the bank chief of improperly selling $13 million in stock shortly after finding out about the opening of millions of sham accounts and unauthorized credit cards.
The House committee has been investigating Wells Fargo following its $185 million settlement with three government agencies for secretly opening accounts using people’s Social Security numbers and fake emails — causing overdrafts and other penalty fees, as well as hurting people’s credit scores.
During the morning hearing, Rep. Carolyn Maloney (D-NY) entered into evidence a regulatory document showing that Stumpf, 63, had sold about $13 million in shares just days after he said he first found out about the scope of the problem in 2013.
“It seems that when you found out about the fake accounts, instead of helping your customers, you helped yourself,” she said.
Stumpf didn’t deny that he sold the shares but maintained that he did so properly.
‘It seems that when you found out about the fake accounts, instead of helping your customers, you helped yourself.’
- Rep. Carolyn Maloney“The timing is very, very suspicious,” Maloney said.
The hearing comes just about a week after Stumpf went before the Senate committee, where Sen. Elizabeth Warren (D-Mass.) told Stumpf he should lose his job, give back his bonuses and be criminally prosecuted for overseeing the bank during the massive fraud.
His testimony did little to reassure Wall Street that he would be able to hold onto his position as CEO and chairman of the board.
Any chance that Wells Fargo’s CEO would have gotten a second chance to rehabilitate his image was put down immediately.
“To the American people, this feels like deja vu all over again,” said Rep. Jeb Hensarling (R-Texas), who chairs the committee and spoke first. “It’s just beyond credibility that someone up the food chain didn’t order this, or condone it, or turn a blind eye to this.”
Wells Fargo has fired 5,300 employees for opening the sham accounts, but no senior executives have been held responsible. The company’s board is conducting an internal review.
The bank’s cross-selling practices, in which employees were expected to push each customer to have eight banking products, has been under harsher scrutiny since Warren brought up a 2010 annual report in which Stumpf outlined his reasoning behind that number: “Eight rhymes with great.”
When questioned about that at the hearing, Stumpf backtracked. “We never had a target of eight,” he said. “Again, it was aspirational.”
The hearing is the latest event in a bad week for Wells. On Wednesday, California ended its business relationship with the bank for a year. Earlier in the week, the board took back $41 million from Stumpf, who will also forfeit a bonus for this year and will work without a salary as long as the bank’s investigation continues.
The pain probably won’t end anytime soon as the Justice Department and the Labor Department are also conducting separate investigations.
“Your problem is coming. You think today is tough?” said Rep. Michael Capuano (D-Mass.).
“When the prosecutors get ahold of you, you’re going to have a lot of fun.”
