WASHINGTON – Wells Fargo’s then-Chief Financial Officer Tim Sloan openly bragged to investors about the bank’s record-breaking ability to open customer accounts during the height of the organization’s 2009-2016 scandal, according to earnings call transcripts shared Tuesday.
During a hearing before the Senate Banking Committee, Sen. Elizabeth Warren (D-Mass.) berated Sloan, who took over as CEO after John Stumpf’s retirement following the scandal. Sloan denied that he aggressively promoted the bank’s ability to open new accounts, but Warren provided a binder full of conversations contrary to Sloan’s claim.
“Nobody bragged more about Wells Fargo’s ability and commitment to open new accounts for existing customers,” Warren said before reading a quote from Sloan during an April 2011 call with investors: “’I can’t wait to get a credit card in every one of our creditworthy customers’ wallets.’ Nothing about whether your customers wanted or needed a credit card. All that mattered was opening new accounts.”
Sloan, who has been with the bank for more than 30 years, countered that he is proud of Wells Fargo credit card products, and since the scandal he has led the way in making fundamental changes as well as levying penalties for executive accountability.
Following an investigation by the Los Angeles Times, Wells Fargo announced a $185 million agreement with the city of Los Angeles and federal regulators in September 2016. As part of a sales campaign directed by Wells Fargo’s Community Bank branch, employees had opened as many as 3.5 million unauthorized accounts for customers dating back to 2009. The bank’s data is unreliable beyond 2009 because that’s when the bank merged with Wachovia, according to Sloan. Sloan said on Tuesday that about 190,000 accounts received about $6 million in charges, money which he said has been refunded.
The bank has since reached a $142 million class-action settlement with customers and has fired more than 5,000 employees over the scandal, according to Sloan’s testimony. Community Bank chief Carrie Tolstedt, who announced her retirement in July 2016, forfeited $67 million in compensation and equity, and Stumpf forfeited $69 million. In 2015, Tolstedt earned $9 million, while Stumpf earned $19 million.
According to Warren, Sloan owned two million shares of Wells Fargo stock between 2011 and 2014, when he was allegedly bragging about the bank’s sales abilities. The Massachusetts senator accused Sloan of enabling improper practices, getting rich off them and then covering them up when the bank was exposed.
“At best you were incompetent,” Warren said. “At worst you were complicit, and either way you should be fired. Wells Fargo needs to start over, and that won’t happen until the bank rids itself of people like you who led it into this crisis.”
Sen. John Kennedy (R-La.) said during the hearing that he’s a fan of free enterprise and he likes to see the success of American business, but he’s against business practices that put the company’s interests before customers.
“What in God’s name were you thinking?” Kennedy asked.
“Senator, I completely agree with you. Wells Fargo cannot be a successful American institution – we can’t employ 270,000 people … unless we put our customers first,” Sloan said. “We made a mistake. There’s no question about that.”
Sen. Sherrod Brown (D-Ohio) asked Sloan to commit to ending the bank’s forced arbitration practices, which he said enabled the bank to squelch the issue, citing lawsuits and forced arbitration settlements between 2013 and 2015. The bank has made the argument that fine print on a real account should apply to a fraudulent one, Brown noted, claiming that Wells Fargo made that argument as recently as last month against customers in Utah.
Sloan declined to end the practice, citing a Consumer Financial Protection Bureau report that states that forced arbitration is fast, efficient and provides better returns for customers. Brown called Sloan’s claim a selective reading of the CFPB findings.
“Give them their day in court, those that you are not able to help or not able to satisfy,” Sloan said.