Lawmakers crank up heat on Wells Fargo
A group of senators wants federal prosecutors to follow through on their tough talk with action, specifically in looking at Wells Fargo (WFC) and its multi-state fraud involving phony customer accounts.
Noting the Department of Justice was already looking into whether the bank violated federal laws when its employees opened up to 2 million accounts for customers without their knowledge, the lawmakers, led by Mazie Hirono of Hawaii, in a Tuesday letter urged officials to specifically investigate the culpability of senior executives at the bank.
“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,” said the senators, a group that included Massachusetts Democrat Elizabeth Warren and Vermont Independent Bernie Sanders.
No high-level Wall Street executive faced prosecution after the 2008 financial crisis, with the government instead settling with financial institutions, imposing penalties borne by shareholders instead of bank executives, the lawmakers noted, adding that the penalty “tended to pale in comparison to the profits the bank generated from its illegal activity.”
But none of what the senators had to say is news at the DOJ, something the senators point out in their missive to Attorney General Loretta Lynch.
More than a year before Wells Fargo found itself in hot water over the creation of bogus accounts, the DOJ announced it was changing its policy on individual liability on corporate wrongdoing.
“Our obligation at the Justice Department (is) to ensure that we are holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom,” Deputy Attorney General Sally Quillian Yates said in remarks delivered Sept. 10, 2015, to an audience at New York University School of Law. “That means pursuing not just corporate entities, but also the individuals through which these corporations act.”
The switch in department policy signaled that it would no longer be business as usual for corporate America, said Yates, who declared: “The rules have just changed. Effective today, if a company wants any consideration for its cooperation, it must give up the individuals, no matter where they sit within the company.”
In her speech, Yates said she had outlined the steps to be taken in a memo issued the previous day to all of the Justice Department’s prosecutors and civil litigators, which argued that “one of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.”
In recent days, California and Illinois have suspended investment activity with Wells Fargo over the debacle, which also prompted the board of directors at the nation’s second-largest bank to order CEO John Stumpf and the executive who ran its consumer banking division to forfeit tens of millions of dollars in bonuses.
Still, the scandal that cost the bank $185 million in fines and about 5,300 employees their jobs is viewed by many lawmakers and academics as a slap on the wrist.
Or, as Warren told Stumpf at a Senate hearing just over two weeks ago, “You should resign. You should be criminally investigated.”