PORTLAND, OR – Today, at a news conference outside a Wells Fargo branch in Portland, Oregon, U.S. Senators Jeff Merkley (D-OR) and Al Franken (D-MN) announced that they are calling on federal officials to pursue a robust criminal investigation into the actions of the bank and its executives.
Last month, it was revealed that over the course of many years, Wells Fargo had fraudulently opened millions of credit card and banking accounts without its customers’ permission. Despite the CEO’s claim in September that he was taking “full responsibility” for the scandal, no high-level executives have been fired.
“When ordinary Americans break the law, they pay the price,” said Merkley. “But time after time, when executives are involved in extensive fraud, they walk away scot-free. That must end. The fraud at Wells Fargo, involving two million phony accounts, merits a robust criminal investigation of the executives who managed the bank.”
“Wells Fargo’s conduct was outrageous and unacceptable, and I believe that for too long, we’ve failed to hold executives accountable,” said Franken. “That’s why Sen. Merkley and I wrote to the Department of Justice urging them to launch an investigation of the conduct at Wells Fargo. This is about justice for the millions of consumers who were victims of Wells Fargo’s scheme. And it’s about making sure that executives at big banks like Wells Fargo are held responsible for their actions.”
The Senators formally made their call for an investigation in a letter with Senator Mazie Hirono (D-HI) and 13 other Senators. The full text of the letter follows below.
October 4, 2016
The Honorable Loretta E. Lynch
Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
Dear Attorney General Lynch:
According to public filings, the Department of Justice is investigating whether Wells Fargo violated federal laws when its employees opened as many as two million deposit and credit card accounts without customer authorization over the span of several years. As part of this investigation, we urge you to thoroughly investigate the culpability of senior executives at the bank. We believe this is a critical test of the Department’s promise last September to “strengthen [its] pursuit of individual corporate wrongdoing” and to “focus on individuals from the inception of the investigation.”
Following the 2008 financial crisis, the American people watched as senior executives repeatedly escaped accountability for actions that nearly brought down the global economy. No top Wall Street executives went to prison or even faced prosecution. Instead, the government regularly settled for a penalty that was borne by the bank’s shareholders, not its executives. Even that penalty tended to pale in comparison to the profits the bank generated from its illegal activity.
That trend has continued. In 2015, for example, BNP Paribas was ordered to pay nearly $9 billion in penalties for violating sanctions against Sudan, Cuba, and Iran. The firm potentially compromised U.S. national security objectives by facilitating billions of dollars in transactions for sanctioned entities, yet none of the bank’s employees faced charges.
Americans are rightly frustrated when they see that justice for the wealthy and powerful is very different than justice for everybody else. A bank teller that takes a handful of bills from the cash drawer is likely to face charges for theft and prison time. He or she can’t hide behind an army of lawyers and corporate policies that diffuse accountability for those at the top. Meanwhile, an executive who oversees a massive fraud that implicates thousands of bank employees and costs customers millions of dollars can walk away with a hefty retirement package and millions in the bank. It’s no wonder that Americans are skeptical of the effectiveness of our criminal justice system.
The Justice Department promised to change this two-tiered system in a September 9, 2015 memo issued to the nation’s federal prosecutors by Deputy Attorney General Sally Quillian Yates. The memo articulated new policies that prioritize the investigation and prosecution of individual corporate employees. As stated in the memo, “[o]ne of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.” In an interview following the release of the memo, Deputy Attorney General Yates stated, “It’s only fair that the people who are responsible for committing those crimes be held accountable. The public needs to have confidence that there is one system of justice and it applies equally regardless of whether that crime occurs on a street corner or in a boardroom.”
We could not agree more. 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.
That’s why the Wells Fargo investigation is so important. Last week’s Senate Banking Committee hearing with Wells Fargo Chairman and CEO John Stumpf raised serious questions that demand additional answers and point to potential individual wrongdoing. Mr. Stumpf testified under oath that he became aware of employees creating fraudulent bank accounts in 2013. Yet for years thereafter, Mr. Stumpf did not disclose that information to investors and did not take decisive action to crack down on the incentives that encouraged that behavior, even as the bank fired more than 5000 employees for improper behavior. Instead, he continued to personally benefit by pitching Wells’ inflated retail account numbers to investors.
We are not in a position to determine if any of the senior executives at Wells Fargo committed criminal conduct. That is ultimately the job of the Justice Department and courts. But these facts raise questions about whether senior executives, including Mr. Stumpf, knowingly allowed illegal conduct to continue. As University of Virginia Law Professor Brandon Garrett noted, “If it was one person or even 100, you might argue it was a rogue contingent. But you can’t seriously argue that 5,000 people have gone rogue. That’s systemic behavior. People above them had to have noticed.”
While the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency settlements in this case are a good first step toward providing restitution to Wells Fargo’s customers, they are no substitute for a thorough Justice Department investigation into potential wrongdoing by senior executives at the bank. We hope the Department follows through on its promise in the Yates memo and brings all the resources it has to bear on investigating the conduct of Wells Fargo’s senior leadership.