What did Wells Fargo’s new CEO know about the scandal? Senators push for answers

Sen. Elizabeth Warren (D-Mass.) questions Wells Fargo Chief Executive John Stumpf, foreground, during a Senate Banking Committee hearing Sept. 20. He retired last week.
(Susan Walsh / Associated Press)

Two U.S. senators are pressing Wells Fargo & Co. about how much new Chief Executive Timothy Sloan knew about the unauthorized-accounts scandal that led to his appointment.

Elizabeth Warren (D-Mass.) and Robert Menendez (D-N.J.), outspoken critics of Wells Fargo, also want to know more about how much money former Chief Executive John Stumpf will get after resigning last week in the wake of the controversy.

“Given the scope of wrongdoing on his watch, Mr. Stumpf’s resignation is entirely appropriate,” the senators wrote in a letter Thursday to Stephen Sanger, who is the new chairman of Wells Fargo’s board of directors.

“But a resignation alone is not enough to assure proper accountability at Wells Fargo,” they said. “Instead, it raises additional questions.”


The letter is another signal that Stumpf’s resignation didn’t end the problems stemming from the revelations last month in a $185-million settlement with Los Angeles City Atty. Mike Feuer and federal regulators that bank employees created as many as 2 million accounts without customer authorization.

The California Justice Department is investigating allegations of criminal identity theft in the creation of the accounts, according to a search warrant and related documents sent to Wells Fargo that were obtained this week by the Los Angeles Times through a public records request.

U.S. attorneys in San Francisco, New York and Charlotte, N.C., also have opened investigations, as have two congressional committees.

And lawmakers continue to pound Wells Fargo.

On Tuesday, Rep. Maxine Waters (D-Los Angeles) wrote to the Office of the Comptroller of the Currency requesting more information about the bank’s compliance with the Community Reinvestment Act, a federal law that includes fair lending and consumer compliance regulations.

Wells Fargo also has yet to respond to questions put to the bank last month by Warren, Menendez and other Democratic members of the Senate Banking Committee.

Warren and Menendez in their new request Thursday asked how the board decided to choose Sloan, a longtime Wells Fargo executive; whether he was questioned about his knowledge of the creation of unauthorized customer accounts; and any actions he might have taken in response.

The senators also asked if the board conducted “an independent investigation of whether Mr. Sloan knew about or took appropriate actions to prevent this scandal” and if so, what that investigation showed.

Quick breakdown of the Wells Fargo scandal.

In announcing Sloan’s promotion Oct. 12, Wells Fargo said he had been with the bank for 29 years and “knows Wells Fargo’s operations deeply,” but that was unsettling to the senators.

“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,” Warren and Menendez wrote.

Sloan, who became president and chief operating officer in November, has said he was aware of the scandal as early as late 2013, when a Los Angeles Times investigation first publicly revealed the problems.

In a statement, the board’s independent directors said Thursday they have “great confidence in Tim Sloan’s leadership.”

“We appreciate the senators’ concerns, take these issues seriously and are deeply concerned about what has come to light,” the directors said, noting they had previously announced the board was conducting an independent investigation of the unauthorized accounts matter.

“The company has taken immediate initial actions to make our customers whole, to understand the full extent of the problems and to fix them, to hold executives accountable through compensation actions and to begin to restore the trust our customers have placed in our institution for 164 years,” the board said.

The senators also raised questions about Stumpf’s retirement compensation.

Stumpf will not receive any severance, according to public filings. But he will retain more than $100 million in vested stock, plus accumulated pension and 401(k) benefits exceeding $24 million, despite the loss of other significant compensation, the filings said.

Wells Fargo’s board announced last month that Stumpf would forfeit about $41 million in unvested stock awards and eligibility for an annual bonus, which had totaled $4 million for several years.

But Warren and Menendez asked whether the board would attempt to claw back more of Stump’s compensation and if he would “serve as a ‘consultant’ or in any other capacity for Wells Fargo or the board.”

The senators requested answers to their questions by Oct. 27 and a briefing by Nov. 3.

The directors said Thursday they were “prepared to take additional actions, including of compensation already paid out” to Stumpf if warranted by its investigation’s findings.

After Stumpf’s Sept. 20 appearance before the committee, senators sent the bank dozens of questions, including whether unauthorized accounts might have been created earlier than 2009 and whether fraudulent sales practices took place in the bank’s other business units.

The Sept. 28 letter also targeted Stumpf and former community banking executive Carrie Tolstedt, demanding emails and other communications between those two related to unauthorized accounts.

Bank spokesman Mark Folk said Wednesday the bank is “working to respond to the inquiries we’ve received from senators and members of Congress.”

Follow @JimPuzzanghera on Twitter

Times staff writer James Rufus Koren contributed to this report.


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3:30 p.m.: This article was updated with comment from Wells Fargo.

12:00 p.m.: This article was updated with details about a prior letter sent to Wells Fargo by the Senate Banking Committee.

This article was originally published at 9:50 a.m.