Buffett Breaks Silence on Wells Fargo Scandal

By Nikhil Subba Wall Street Reuters

Berkshire Hathaway Chairman Warren Buffett wanders the company trade show before his company's annual meeting in Omaha, Nebraska April 30, 2011. Dozens of BH companies had displays in the building next to the site of the meeting. REUTERS/Rick ... Wilking (UNITED STATES - Tags: BUSINESS) (Reuters)

Wells Fargo & Co made a "terrible mistake" by keeping in place sales goals that "corrupted people," billionaire investor Warren Buffett told CNN in an interview, in his first public comment on the bogus account scandal at the bank.

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"It was a dumb incentive system, which when they found out it was dumb, they didn't do anything about it," Buffett told CNN's Poppy Harlow.

Berkshire Hathaway Inc, the conglomerate run by Buffett, is Wells Fargo's largest shareholder.

The scandal at Wells Fargo emerged in September when the bank agreed to pay $185 million to settle regulatory charges that some of its employees opened as many as 2 million accounts without customers' knowledge, in order to meet sales targets.

It also led to the departure of veteran Chief Executive John Stumpf last month.

Buffett described Stumpf as a "very decent man" who made a "hell of a mistake" and didn't correct it.

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When asked by Harlow if he had advised Stumpf to step down, Buffett said he had not.

"I don't know the exact words, but I said I don't think you understand the gravity of this," he said.

The legendary investor backed Tim Sloan, who succeeded Stumpf as CEO of the third-largest U.S. bank by assets.

Buffett has over the years repeatedly praised Wells Fargo, whose stock Berkshire has owned since 1989, and this year asked the U.S. Federal Reserve for permission to buy more.