Thousands of Wells Fargo employees were let go after federal and state regulators exposed the long-running fake account fiasco, and the civil lawsuits and congressional investigations into the matter are beginning to pile up. Now a coalition of 14 senators are asking the Department of Justice to launch a criminal investigation in the hope of ferreting out individuals at Wells Fargo who may have encouraged or turned a blind eye to this fraud.
The Justice Department is already looking into this mess, but because of the DOJ’s recent history of not prosecuting top financial executives, the group of lawmakers, led by Sen. Mazie Hirono of Hawaii, sent a letter [PDF] yesterday to U.S. Attorney General Loretta Lynch, calling on the DOJ to make sure that both Wells Fargo and the individuals responsible are held accountable.
The letter contrasts a thieving bank teller, who would likely face jail time if caught pilfering cash from the till, with a bank executive, “who oversees a massive fraud that implicates thousands of bank employees and costs customers millions of dollars” but who can walk away with a hefty retirement package and millions in the bank.
This appears to be a reference to the recently “retired” Wells Fargo executive Carrie Tolstedt, who oversaw the bank’s retail banking division during the years where employees opened up more than two million unauthorized fake accounts in customers’ names to meet sales goals and quotas. Tolstedt reportedly walked away from Wells with more than $100 million in stock and options.
The senators also criticize the DOJ for making settlement deals with large banks that don’t result in any individual prosecutions, pointing to, among other examples, the lack of charges brought against Wall Street executives in the wake of the 2008 financial collapse.
“Every time the Department of Justice settles a case of corporate fraud without holding individuals accountable, it reinforces the notion that the wealthy and powerful have purchased a higher class of justice for themselves,” states the letter, which was also signed by Senatrs Tammy Baldwin (WI), Richard Blumenthal (CT), Richard Durbin (IL), Al Franken (MN), Kirsten Gillibrand (NY), Angus King (ME), Amy Klobuchar (MN), Patrick Leahy (VT), Ed Markey (MA), Jeff Merkley (OR), Bernard Sanders (VT), Elizabeth Warren (MA), and Ron Wyden (OR).
The DOJ was widely criticized under former Attorney General Eric Holder for its repeated failures to prosecute individuals at large financial institutions. The then-AG denied these claims that his prosecutors treated some banks as “too big to jail,” but when the prosecutor in charge of investigating the mortgage meltdown publicly admits that he loses sleep at night worry about how criminal charges might impact a bank’s bottom line, it calls the entire department’s practices into question.
More recently, DOJ said it would strengthen its “pursuit of individual corporate wrongdoing” and “focus on individuals from the inception of the investigation,” so now the senators are calling on the Attorney General Lynch to make good on that pledge.
What is especially galling to some is the fact that Wells Fargo CEO John Stumpf admitted under oath at last month’s Senate Banking Committee hearing that he knew about these bad practices as far back as 2013.
“Yet for years thereafter, Mr. Stumpf did not disclose that information to investors and did not take decisive action to crack down on the incentives that encouraged that behavior, even as the bank fired more than 5000 employees for improper behavior,” notes the letter. “Instead, he continued to personally benefit by pitching Wells’ inflated retail account numbers to investors.”
The senators note that it’s not for them to determine the guilt or innocence of any Wells employee, but the fact that senior executives have admitted to knowing about the problem and allowed it to continue — and only stopped the underlying incentive/goals program after being hit with a $185 million penalty — they believe there is certainly enough of a stink to investigate the source of the odor.
by Chris Morran via Consumerist
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