Wells Fargo CEO Stumpf's Career in Downward Spiral
Wells Fargo (NYSE:WFC) CEO John Stumpf’s career could be in jeopardy, according to sources close to the under fire executive, the FOX Business Network has learned after the bank’s employees were caught creating fraudulent accounts without their customers consent. The bank was forced to settle with the Consumer Federal Protection Bureau (CFPB) for $185 million.
Federal regulators discovered employees, since 2011, were secretly creating millions of unauthorized bank and credit card accounts without ever telling their clients. The bank told the CFPB that they had fired over 5,300 employees over the last five years in connection to the improper behavior of their employees.
Analysts have projected that bank employees opened over 1.5 million deposit accounts that may not have been authorized and submitted over 560,000 credit card accounts without customer knowledge.
Even after settling with the CFPB, Wells Fargo is starting to feel mounting regulatory pressure. The U.S. Department of Justice has opened up an investigation as did the House of Representatives, who are seeking interviews with numerous bank executives in light of the scandal. The DOJ investigation could lead to additional penalties and criminal charges.
That being said, some Wall Street analysts believe Stumpf will survive. Dick Bove, analyst at Rafferty Capital, believes the Wells Fargo board won’t fire him because that would be admitting the bank did something wrong and they aren’t going to do that. “When you fire the CEO you are giving massive credence to the issues in the company and they aren’t going to do that,” said Bove.
However, that doesn’t mean other company executives won’t feel the heat. Along with the 5,300 who were fired in connection with the scandal, potentially other employees up the chain of command may be held accountable. Bove agrees, “Human resources are the group that needs to be shaken up because the fact of the matter is: what type of people were they hiring who would do something like this?”
Indeed, sources tell FOX Business, before the settlement employees were going to human resources with evidence implicating those who were creating the fraudulent accounts and management did nothing. Other sources close to Wells Fargo say that this scandal is just the beginning and the bank has been plagued with practices that are even worse than fraud. They did not elaborate further.
Wells Fargo declined to comment. After asking the CFPB if they were investigating other issues at the bank, spokeswoman Moira Vahey said, “We don’t have further comment about the consumer harms identified beyond what is in our public order. However, I can say that we will remain vigilant about taking action against any company within our jurisdiction who is engaging in harmful actions.”
Wells Fargo can try to avoid holding their top executive responsible but the House and Senate committees are not going to look the other way. Senator Elizabeth Warren (D-MA) will be among the lawmakers grilling Stumpf when he appears on Capitol Hill next Tuesday to face a Senate panel licking their chops at the chance to lay the blame of the scandal on him. The House Financial Services Committee is also set to hold a hearing at the end of the month and has requested that Stumpf testify.
The customers are not planning on going down without a fight. Today a lawsuit was filed against Wells Fargo on behalf of bank and brokerage customers in a Utah Federal Court for alleged fraud, negligence and invasion of privacy.
Wells Fargo shares have lost 10.6% this month.