Since Wells Fargo’s fake account fiasco came to light in Sept. 2016, the top executive at the bank has “retired,” other executives have departed, and many have lost bonuses. Despite this, there are many holdovers from the years when employees opened millions of unauthorized accounts. To this end, Massachusetts Senator Elizabeth Warren is calling for the ouster of 12 Wells Fargo board members.
In a letter [PDF] to Federal Reserve Chair Janet Yellen, Warren urged the removal of 12 members who served on the bank’s board from May 2011 to July 2015, the timeframe in which the fake account scandal occurred.
Warren argues in the letter that the central bank has the authority to remove the members, adding that the Reserve should do more to make an example out of Wells Fargo.
According to Warren, Congress has empowered the Federal Reserve to remove board members if they “violated any law or regulation,” “engaged or participated in any unsafe or unsound practice” that caused an insured depository institution to “suffer financial loss” and that demonstrated “continuing disregard… for the safety or soundness” of that institution.”
The lawmaker contends that each of these elements were highlighted in an April report about the scandal. For instance, Warren notes that the scandal revealed “severe problems with the bank’s risk management practices.”
“The Board’s failure to establish adequate risk management practices and uncover these improper retail sales practices demonstrated ‘continuing disregard’ for the bank’s safety and soundness,” Warren wrote, noting that the report detailed the Board’s refusal to seriously address the improper sales practices despite years of red flags.
As for financial loss, Warren writes that since the scandal came to light, Wells Fargo has entered into several settlements and agreed to a number of monetary penalties, including a $185 million fine and a pending $142 million settlement with customers.
These actions, Warren contends, would justify the Federal Reserve’s removal of all responsible board members.
“I urge you to use the tools Congress has given you to remove the responsible board members and protect the continued safety and soundness of one of the country’s largest banks,” she wrote.
While Wells Fargo’s Board has taken several steps to rectify the fiasco, as detailed in April’s 113-page report [PDF], Warren argues the board itself should be held culpable.
Among steps outlined in that report, the board announced it would take back another $75 million in compensation paid to retired CEO John Stumpf and former head of retail banking Carrie Tolstedt. Specifically, it would claw back an addition $47 million from Tolstedt and $28 million from Stumpf. Previously, Stumpf lost $41 million and Tolstedt $19 million in vested options and equity awards.
According to the Board, it has also taken away $180 million in stock and bonuses that were previously spilt between several former and current executives. In March, Wells said it wouldn’t pay about $32 million in cash bonuses and equity to new CEO Tim Sloan and seven other top executives.