And he’s a hero in the banking world.
Proving crime does pay, John Stumpf got $100 million as CEO of Wells Fargo over the last four years—during which Wells Fargo’s employee incentive plan rewarded lower level employees for installing phony bank products on customer accounts. Customers paid fees for those accounts unless they discovered and protested. Yet fraud comes to mind.
Two senators* hurled the word fraud at Stumpf who patiently listened during the US Senate hearings last week on Wells Fargo misdeeds. He was not upset. He had a “this, too, shall pass” look. After all, Stumpf and other big bank CEOs have heard this stuff before when their industry gets caught mishandling other people’s money. But after the sound and fury of a senate hearing, they rest easy. They are confident it will mean nothing.
So Stumpf sticks to his story that no top WF execs knew about it, which is as believable as Chris Christie’s claim of not knowing about the George Washington Bridge closing. A top WF exec, Carrie Tolstedt, may have been forced to resign. She headed WF retail operations where the phony accounts were hatched. To ease her pain, she got a $100 million exit package.**
Three years ago The Los Angeles Times did report that WF phony accounts were being created. The story then died. Now with the story reborn, Stumpf is getting tough:
1-Top execs have been given subscriptions to The Los Angeles Times. He will personally quiz them about any content injurious to Wells Fargo, including cartoons.
2-Wells Fargo will stop illegal account formation by January 1, 2017. I suppose that’s like a bank robber promising to stop robbing banks in the next tax year. Stopping fraud takes time—at Wells Fargo.
3-Stumpf himself will deliver the $185 million to the government agencies. He will also remind WF accounting that the $185 million is a tax-deductible cost of doing business.
If Stumpf survives as WF CEO, bankers will celebrate (privately).
*Democratic Senator Elizabeth Warren really let Stumpf have it. She is an authority on banking misbehavior. The only thing she didn’t do was throw a shoe at him. Republican Senator Pat Toomey charged fraud, a good idea since he is running for re-election in Pennsylvania where ticket splitting may be his only path to victory.
**For more, see James B. Stewart, Wells Fargo Case Tests A Get-Tough Approach, New York Times Business Day, 23 September 2014, pages B1, B4.