WASHINGTON—Wells Fargo CEO John Stump received more tough treatment in front of Congress Thursday, as members of the House Financial Services Committee accused him of running "a criminal enterprise," stating he should be fired or even jailed.
Meanwhile, the state of California has also said it will be suspending business with the bank.
Stumpf was grilled during a Senate hearing last week, where Senator Elizabeth Warren called him “gutless” and recommend that he should step down.
Thursday Rep. Michael Capuano compared the Wells Fargo scandal, in which employees created more than two-million sham accounts and harmed account holders, to the massive fraud that occurred at Enron. Capuano said that those who lead Wells Fargo reminded him of "the guys who ran Enron." Capuano said Stumpf is "clearly and unequivocally guilty" of a range of crimes, including conspiracy to commit fraud, conspiracy to commit identity theft and racketeering,” CNN Money reported.
Rep. Stephen Lynch said that Wells Fargo could be prosecuted under the Racketeer Influenced and Corrupt Organizations Act (RICO statute) that has been applied against FIFA as well as members of the Mafia, CNN Money reported, adding that Rep. Gregory Meeks accused Stumpf of running "basically a criminal enterprise."
HFSC Chairman Jeb Hensarling Thursday said he “will not hesitate to issue subpoenas. We will do what is necessary to get to the bottom of this,” reported CNN Money, which noted that lawmakers termed Wells Fargo a “school for scoundrels” with a “broken culture.”
Analysts who spoke with CUToday.info have stated that a badly structured incentive program that pressured employees to sell eight accounts per customer, poor staff training, a weak corporate culture, and the CEO himself, led to the problems at Wells Fargo, advising banks and credit unions to be wary of those potential issues in their own shops.
Thursday Stumpf stated again that he apologizes for the unethical actions of employees, but again denied management’s involvement. "I try to lead with courage and conviction, but of course we make mistakes," Stumpf told the HFSC.
CNN Money reported that Stumpf rejected a rep’s accusation that he was motivated to sell $13 million of stock in 2013 because he had just been briefed about bank employees opening accounts without customers’ authorization.
When Stumpf was told about the matter three years ago, his first move was to “help himself” before helping his customers, Rep. Carolyn Maloney told Stumpf Thursday, “The timing is very, very suspicious and it raises serious questions.”
As CUToday.info reported, shortly after the Senate hearing Stumpf announced that he will forfeit much of his 2016 salary, as well as $41 million in stock awards. Stumpf had been told during his Senate testimony by several senators that he and other executives should be giving up their compensation.
Wells Fargo, which announced it has launched an internal probe of the scandal that led to the firing of more than 5,000 employees, has also announced that Carrie Tolstedt, that executive who oversaw operations that included the phony accounts, has left the bank ahead of her planned retirement. She will also not receive a bonus or severance, the bank reported. Wells Fargo will reportedly also seek to “claw back” $19 million in compensation paid to Tolstedt. Tolstedt had been due approximately $124 million at retirement.
Bloomberg reported that Stumpf told the HFSC it was his "recommendation" for the board to claw back his $41 million in his stock awards and to forfeit a 2016 bonus and salary during the investigation.
Meanwhile, in the wake of the Wells Fargo scandal, California’s treasurer said the state will suspend many of its relationships with Wells Fargo as the result of what he called “venal abuse of its customers.”
According to the treasurer, John Chiang, he made the decision to suspend Wells Fargo’s “most highly profitable business relationships” with the state for at least a year, including the lucrative business of underwriting certain California municipal bonds, as the result the scandal.
“How can I continue to entrust the public’s money to an organization which has shown such little regard for the legions of Californians who placed their financial well-being in its care?” Chiang stated in a letter to Stumpf and the bank’s board members.
Chiang said he was also suspending making any additional investments in Wells Fargo securities and would suspend the bank’s work as a broker-dealer hired to buy investments on the treasurer’s behalf. The suspensions will last for one year, or longer if any evidence emerges that Wells Fargo has “re-engaged in the same behavior” or failed to abide by the terms of a consent order it signed with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, according to Chiang.