It's the first punishment for a bank's CEO since the 2008 financial crisis.
The CEO of Wells Fargo has been handed down a sort of financial sentencing for his part in the cross-selling scandal in what Elizabeth Warren referred to as the need for accountability and responsibility.
The massive bank was caught opening more than two million fake accounts on behalf of existing customers to inflate their sales figures and pitched these figures to investors and analysts to raise their share prices. Since CEO John Stumpf has 6.75 million shares in Wells Fargo, he personally profited from this scam as the share prices increased.
While questioning Stumpf in a hearing with the Senate Banking Committee, Senator Elizabeth Warren revealed that since the share price went up $30 during the time that this scam was going on, Stumpf personally pocketed more than $200 million just from this increase.
Wells Fargo announced on Tuesday that the CEO will forfeit $41 million in unvested stock, give up his $2.8 million salary for a time, and receive no bonus for this year. This is a mere slap on the wrist because Stumpf was not forced to resign nor was he fired for his part in the scandal, and he did not have to pay back his salary or bonuses for the years he was involved.
In comparison, 5,300 low-level employees were fired for their involvement in cross-selling by convincing customers to purchase additional, unnecessary bank accounts in order to boost their own numbers. These low-level employees were working under the instruction of the community banking division, run by Carrie Tolstedt, who mysteriously retired at the early age of 56, just before she was to come under fire for her role in the scam.
Warren pointed out in the hearing that had Tolstedt been fired before she was able to retire – since Stumpf admitted to knowing about the scandal prior to her leaving, she would have lost up to $45 million of her award in stocks.
The point being made by the Senator is that thousands of employees simply following orders from people high up in the company were terminated but the people actually giving the orders and conducting the scam walked away with millions of dollars and little to no punishment.
Stumpf’s personal wrist-slap may be small, but it’s certainly a step in the right direction. If America wants banks to stop taking advantage of consumers while top executives line their own pockets, it’s time to hold banks accountable by sentencing them to jail.
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