Wells Fargo CEO hammered over sham accounts scandal

Embattled Wells Fargo CEO John Stumpf was hammered Thursday by US lawmakers who questioned his fitness to serve as the bank's chief following a sham accounts scandal.

Stumpf offered renewed contrition in an appearance before the Financial Services Committee of the House of Representatives, which is investigating the bank's sales practices after it admitted this month to opening millions of credit and debit accounts without customers' knowledge.

"I am deeply sorry that we failed to fulfill our responsibility to our customers, to our team members, and to the American public," said Stumpf.

Wells Fargo, the second largest US bank by market value, this month paid $190 million in fines and restitution over the accounts.

Stumpf announced that his bank would this week end the kind of high-pressure sales goals that had driven employees to meet targets by opening the accounts. The bank had planned to do so by January 1 but was accelerating the process, he said.

Amid persistent public outrage, California's treasurer on Wednesday suspended ties with the bank, which is based in the state, citing Wells Fargo's "venal abuse" of its customers.

On Tuesday, the bank's board announced that Stumpf would forfeit $41 million in compensation and that the its former community banking head Carrie Tolstedt will also forfeit $19 million. Neither is to receive any bonus.

Stumpf is now working without pay pending the outcome of an internal review. Federal prosecutors have also opened a probe, according to The Wall Street Journal.

- 'Beyond credibility' -

During Thursday's hearing, indignant lawmakers pressed Stumpf as to whether senior management would be held to account after the bank fired 5,300 employees over the illegal sales practices.

"It's just beyond credibility that somebody up the food chain didn't either order this, condone it, or turn a blind eye to it," said Jeb Hensarling, the committee's Republican chair.

Stumpf said an internal review would examine the roles of senior management: "The board is going to be involved. Management is going to be involved."

Committee members also noted that the sham sales tactics had spilled out into the open when the Los Angeles Times exposed them in December 2013 but that the practices had not stopped until 2015.

Stumpf said the board had gradually gained awareness of the matter between 2013 and 2015.

"It was in 2015 that we had a full report," he said. "In 2014 we were starting to get more granular information that this was a risk area for the company to focus on."

Committee members hammered Stumpf's fitness to serve as CEO. New York Democrat Gregory Meeks noted that Wells Fargo had been fined over various issues on an annual basis during Stumpf's tenure.

"You can stay being chairman and CEO, is that what you want us to believe?" asked Meeks.

"I serve at the pleasure of the board," answered Stumpf.

"If the buck stops with you, as you have come here and said... then you should be fired," said Meeks, adding that the entire board might have to be replaced as well.

Stumpf said that the bank had contacted more than 20,000 credit card holders identified by accountants to see if they wanted the accounts in their names.

He said that "fewer than 25 percent" had indicated that they either did not want those accounts or could not recall applying for them.

- Bank too big to manage? -

Critics have said that banks such as Wells Fargo, which is among the world's largest by market value, can be unmanageable due to their size.

Indiana Republican Marlin Stutzman asked Thursday whether the sales scandal at Wells Fargo meant it was "too big to manage."

Stumpf denied this.

"This was a focus problem," he said. "We know we have work to do in operational and compliance risk."

Wells Fargo's share price has lost more than 9 percent since the fines were announced on Sept 8.

Around midday Thursday the shares were trading at $44.53, down 1.7 percent.