[BreachExchange] Lawmakers: Wells Fargo a 'criminal enterprise' like Enron

[Audrey McNeil]

http://www.wgal.com/money/wells-fargo-boss-grilling-by-
congress-round-2/41880418

Wells Fargo CEO John Stumpf is running "a criminal enterprise" and should
be fired or even jailed, several members of Congress claimed.

Rep. Michael Capuano on Thursday said the Wells Fargo scandal and the
people who lead the bank reminded him of "the guys who ran Enron," evoking
a company that was found guilty of massive financial fraud.

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.

Stumpf sought to defend his bank in front of a very hostile audience of
members of the House Financial Services Committee. However, Stumpf wasn't
able to get much of a response in beyond his prepared remarks apologizing
for the scandal.

Stumpf was seeking to rebound from a disastrous appearance before the
Senate, a hearing that was highlighted by Senator Elizabeth Warren's epic
takedown, that quickly went viral on social media and got laughs on
late-night television.

He was repeatedly cut off by members of Congress, Republican and Democrat,
who pummeled him by comparing him to an actual bank robber and calling
Wells Fargo a "school for scoundrels" with a "broken culture," among other
things.

Stumpf's appearance comes as calls for his resignation have gotten more
strident. Several House members repeated those demands.

"I recognize we could have done more earlier," Stumpf said. "I try to lead
with courage and conviction, but of course we make mistakes."

Stumpf is defending a scandal that shocked the nation, where it was
revealed that his bank opened as many as 2 million fake accounts and fired
5,300 workers since 2011. Questions mount on how he allowed it to happen
for so long. Workers pin the blame on a Wells Fargo pressure-cooker culture
and wildly unrealistic sales goals set by top management.

Some former Wells Fargo workers were also present at the dramatic hearing.
The House committee continues to gather thousands of pages of documents and
plans to interview Wells Fargo executives.

"I will not hesitate to issue subpoenas. We will do what is necessary to
get to the bottom of this," Rep. Jeb Hensarling, the Republican chairman of
the House committee, said on Thursday.

Stumpf said Wells Fargo has "begun" contacting customers that have open
credit cards identified by a PricewaterhouseCoopers review that were
potentially unauthorized. He said that after reaching out to more than
20,000 customers, fewer than 25% said they either did not apply or cannot
recall. Stumpf said Wells Fargo is closing accounts of those who don't want
their cards and informing credit bureaus.

Rep. Gregory Meeks accused Stumpf of running "basically a criminal
enterprise" that reflects poorly on the rest of the banking industry. "You
should be fired, because the buck stops with you," he said.

Rep. Maxine Waters, whose district includes Los Angeles, said she now
believes Wells Fargo should be broken up because it's "too big to manage."

Waters, the ranking Democrat on the committee, said Wells Fargo has
"refused" to turn over the documents and information lawmakers have
requested.

"It is in your best interest to come forward with those documents," warned
Waters, who called the scandal "some of the most egregious fraud we have
seen since the foreclosure crisis."

Wells Fargo first characterized the fake account scandal as a problem that
began in 2011. However, last week the bank extended its search for
unauthorized accounts by two more years, to include 2009 and 2010.

Former Wells Fargo workers have told CNNMoney the problem goes back even
further. One branch manager in Arizona said she was first pressured to
instruct employees to open fake accounts in 2007. On Thursday, Rep. Carolyn
Maloney also presented Stumpf with evidence from a court case in Montana
that showed Wells Fargo workers were fired for opening unauthorized debit
accounts in 2007.

Despite what Maloney called "clear evidence" of a problem in 2007, Stumpf
declined multiple requests from the Congresswoman to expand Wells Fargo's
review before 2009.

Maloney also accused Stumpf of "very suspicious" sales of $13 million worth
of Wells Fargo stock in October 2013, the largest such sales during his
nine years as CEO. Stumpf has said he first learned of the unauthorized
account problem in 2013 -- though he's sketchy on precisely when and who
told him.

"Did you dump $13 million of Wells Fargo stock through your family trust
right after you found out that your bank had been fraudulently opening
hundreds of thousands of scam accounts?"

Stumpf insisted the stock sales were made "with proper approvals and no
views about anything going on about sales practices." The CEO also said he
owns four times as many shares as required today.

"It seems very, very suspicious that it happened right after your bank was
turned into a school for scoundrels," Maloney said.

Rep. Stephen Lynch took things to an even more serious level, suggesting
Wells Fargo could be prosecuted under the Racketeer Influenced and Corrupt
Organizations Act, the statute known as RICO that has been applied against
FIFA as well as members of the Mafia.

Lynch cited allegations of widespread fraud at Wells Fargo as well as
claims by former Wells Fargo workers who told CNNMoney they were retaliated
against after flagging fraudulent activity. "These whistleblowers were
intimidated or even fired," Lynch said.

Several lawmakers suggested the House expand the hearing to include the
CEOs of other banks. Rep. Brad Sherman said he wants to ensure the
"cross-selling mania that has afflicted Wells Fargo" is not found elsewhere.

Nearly a dozen current and former employees at large banks have told
CNNMoney a sales obsession pervades their banks, too.

Wells Fargo has taken additional steps in recent days to try to quell the
firestorm, including launching a new investigation by the company's
independent directors and scrapping the controversial sales goals earlier
than previously planned.

Stumpf told the House 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.

Under pressure from Warren and others, Wells Fargo has also agreed to claw
back $19 million in stock awards from Carrie Tolstedt, the executive who
led the division that created the fake accounts and has since left the bank.

However, Tolstedt could still walk away with a fortune of $77 million of
options and Wells Fargo shares she accumulated during her 27 years at the
bank, a CNNMoney analysis shows.
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