Elizabeth Warren to Wells Fargo CEO: 'You should resign'
Sen. Elizabeth Warren is stepping up her pressure on Wells Fargo, questioning the bank’s decision to name an insider its new CEO and asking whether more compensation will be stripped away from its former chief executive.
Warren, a Massachusetts Democrat who during a Senate hearing last month grilled then-CEO John Stumpf, says in a letter Thursday that Stumpf’s resignation last week over a bogus-accounts scandal “raises additional questions.” Sen. Robert Menendez, a New Jersey Democrat, also signed the letter to the San Francisco bank’s new chairman, Stephen Sanger.
The letter says it’s unclear if the bank’s board has properly addressed the question of whether new CEO Tim Sloan “knew about or played any role in the scandal.”
A 29-year company veteran, Sloan’s career included serving as chief financial officer from 2011 to 2014, when he was named head of wholesale banking. In November, Sloan took on the additional titles of president and chief operating officer.
“Carrie Tolstedt, the former head of retail banking at Wells Fargo, reported directly to Mr. Sloan beginning in November 2015. And last week, Mr. Sloan admitted that he was aware of the reports of fraudulent activity by bank staff as early as 2013,” the letter says.
“It is difficult to believe that he had no knowledge of or bears no responsibility for the actions of thousands of Wells Fargo employees creating fake accounts under his and other top executives’ watch,” the letter says.
If Stumpf “is simply replaced by another top company executive who was aware of, but did nothing to prevent the widespread fraud that harmed hundreds of thousands of Wells Fargo customers and shareholders,” the letter says, “then the bank is turning its back on accountability.”
Amid fallout from the scandal, Wells announced last month Stumpf’s forfeiture of all of his unvested stock awards, worth a combined $41 million, and that he will not receive any bonuses for 2016.
In their letter, the senators note the figure represents “only a fraction” of the total pay and bonuses Stumpf received during the years his compensation was partly based on “inflated” account growth from cross-selling – getting multiple products in a customer’s hands.
Stumpf will still walk away from Wells Fargo with $133.1 million, made of Wells shares, deferred compensation and a pension account, the letter says.
The letter says Wells hasn’t indicated whether and how the board will seek to take back any salary paid to Stumpf or the estimated $200 million increase in the value of his stock holdings during the years when accounts were being opened with customers’ authorization.
“In light of these ongoing concerns, we continue to have questions about who is being held accountable at Wells Fargo,” the senators wrote. They requested from Sanger responses to nearly a dozen questions by Oct. 27 and a briefing on the issues by Nov. 3.
A Wells Fargo spokesman declined to comment. But in a statement, a spokesman for the board’s independent directors said they appreciate the senators’ concerns and are “deeply concerned” about the unauthorized accounts.
“As previously announced, the board is conducting an independent investigation that will follow the facts wherever they lead and we will share the findings of our investigation when it is completed,” the statement said.
The spokesman said the board “has great confidence” in Sloan’s leadership and that Sloan “is committed to addressing cultural issues and improving systems and processes so this conduct does not occur again.”
The spokesman added that while Stumpf has already given up some pay, “if warranted by the findings of the investigation, the board is prepared to take additional actions, including clawbacks of compensation already paid out.”
For Wells, it’s the latest criticism from Warren, who in a memorable exchange at last month’s Senate Banking Committee hearing told Stumpf he should resign and accused the executive of “gutless leadership.”
Jaret Seiberg, an analyst with Cowen and Co., in a report said Thursday’s letter shows controversy over Wells’ sales practices is not disappearing despite Stumpf’s resignation. The letter also “represents a threat to Mr. Sloan’s future as CEO,” he wrote.
“This is creating a make or break moment for Tim Sloan,” Seiberg wrote. “He needs to be able to explain what he knew about the cross-selling controversy, when he learned of it, and what he did about it.”
If Sloan can’t answer those questions in a “politically satisfying way,” there will be tremendous political pressure on the bank’s board to bring in an outsider as CEO, Seiberg wrote.