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Senator Elizabeth Warren questions Wells Fargo CEO John Stumpf at Banking Committee Hearing - YouTube
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WARREN: Thank you, Mr. Chairman.
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Mr. Stumpf, the Wells Fargo Vision and Values Statement -- which you frequently cite -- says:
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"We believe in values lived not phrases memorized.
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If you want to find out how strong a company's ethics are, don't listen to what
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its people say, watch what they do."
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So let's do that.
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Since this massive years-long scam came to
light, you have said repeatedly, "I am accountable."
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But what have you actually done to hold yourself accountable?
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Have you resigned as CEO or Chairman of Wells Fargo?
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STUMPF: The board, I serve at the...
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WARREN: Have you resigned?
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STUMPF: No I've not.
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WARREN: All right.
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Have you returned one nickel of the millions of dollars that you were paid while this scam
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was going on?
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STUMPF: Well first of all this was by 1 percent of our people...
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WARREN: That's not my question...
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STUMPF: And, and...
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WARREN: My question, it's about responsibility.
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Have you returned one nickel of the millions of dollars that you were paid while this scam
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was going on?
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STUMPF: The board will take care of that.
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WARREN: Have you returned one nickel of the money you earned while this scam was going on?
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STUMPF: And the board will do...
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WARREN: I will take that as a no then.
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Have you fired a single senior executive?
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And by that I don't mean a regional manager or branch manager.
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I'm asking about the people who actually led your community banking division
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or your compliance division?
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STUMPF: We've made a change in our regional, to lead our regional bank....
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WARREN: I just said, I'm not asking about regional managers, I'm not asking about branch
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managers, I'm asking if you have fired senior management.
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The people you actually led community banking division, who oversaw this fraud, or the compliance
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division that was in charge of making sure
that the bank complied with the law?
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STUMPF: Carrie Tolstedt...
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WARREN: Did you fire any of those people?
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STUMPF: No.
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WARREN: No.
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OK.
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So you haven't resigned.
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You haven't returned a single nickel of your personal earnings.
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You haven't fired a single senior executive.
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Instead evidently your definition of accountable is to push the blame to your low-level employees
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who don't have the money for a fancy PR firm to defend themselves.
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It's gutless leadership.
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In your time as Chairman and CEO, Wells has been famous for cross-selling -- which is pushing
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existing customers to open more accounts.
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Cross-selling is one of the main reasons that Wells has become the most valuable bank in the world.
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Wells measures cross-selling by the number of different accounts a customer has with Wells.
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Other big banks average fewer than three accounts per customer.
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But you set the target at eight accounts.
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Every customer of Wells should have eight
accounts with the bank.
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And that's not because you ran the numbers and found that the average customer needed
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eight banking accounts.
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It is because "8 rhymes with great."
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This was your rationale right there in your
2010 Annual Report.
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Cross-selling isn't about helping customers
get what they need.
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If it was, you wouldn't have to squeeze your
employees so hard to make it happen.
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No, cross-selling is all about pumping up Wells' stock price isn't it?
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STUMPF: No.
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Cross-selling is shorthand for deepening relationships.
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We -- what we do well...
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WARREN: Whoa, let me stop you right there.
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You say no?
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No?
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STUMPF: I -- I...
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WARREN: Here are the transcripts of 12 quarterly earnings calls that you participated in from
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2012 to 2014, the 3 full years in which we know this scam was going on.
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I'd like to submit them for the record, if I may, Mr. Chair.
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Thank you.
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These are calls where you personally, made your pitch to investors and analysts about
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why Wells Fargo is a great investment.
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And in all 12 of these calls, you personally cited Wells Fargo's success at cross-selling
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retail accounts as one of the main reasons to buy more stock in the company.
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Let me read you a few quotes that you had.
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April 2012, quote, "We grew our retail banking cross-sell ratio to a record, 5.98 products
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per household."
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A year later, April 2013, quote, "We achieved record retail banking cross-sell of 6.1 products
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per household."
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April 2014, quote, "We achieved record retail banking cross-sell of 6.17 products per household."
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The ratio kept going up and up.
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And it didn't matter whether customers used those accounts or not.
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And guess what?
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Wall Street loved it.
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Here, is just a sample of the reports from top analysts in those years, all recommending
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that people buy Wells Fargo stock in part
because of the strong cross-sell numbers.
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And I'd like to submit them for the record.
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SHELBY: Without objections.
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WARREN: Thank you, Mr. Chair.
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So when investors saw good cross-sell numbers -- they did, while this scam was going on
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-- that was very good for you personally, wasn't it, Mr. Stumpf?
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Do you know how much money, how much value your stock holdings in Wells Fargo gained
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while they scam was under way?
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STUMPF: Well, first of all, it was not a scam.
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And cross-sell is a way of deepening relationships.
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When customers...
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(CROSSTALK)
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WARREN: We've been through this, Mr. Stumpf.
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I asked you a very simple question.
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Do you know how much the value of your stock went up while this scam was going on?
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STUMPF: It's all of my compensation is in our public stock...
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(CROSSTALK)
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WARREN: Do you know how much it was?
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STUMPF: It's all in the public filing.
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WARREN: You're right, it is all in the public records because I looked it up.
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While this scam was going on, you personally held an average of 6.75 million shares of
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Wells Stock.
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The share price during this time period went up by about $30 which comes out to more than
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$200 million in gains all for you personally.
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And thanks, in part, to those cross-sell numbers that you talked about on every one of those calls.
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You know, here's what really gets me about this, Mr. Stumpf.
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If one of your tellers took a handful of $20 bills out of the crash drawer, they'd probably
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be looking at criminal charges for theft.
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They could end up in prison.
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But you squeezed your employees to the breaking point so they would cheat customers and you
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could drive up the value of your stock and put hundreds of millions of dollars in your
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own pocket.
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And when it all blew up, you kept your job, you kept your multimillion dollar bonuses
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and you went on television to blame thousands of $12-an-hour employees who were just trying
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to meet cross-sell quotas that made you rich.
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This is about accountability.
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You should resign.
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You should give back the money that you took while this scam was going on and you should
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be criminally investigated by both the Department of Justice
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and the Securities and Exchange Commission.
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This just isn't right.
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A cashier who steals a handful of $20s is held accountable, but Wall Street executives
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who almost never hold themselves accountable, not now and not in 2008 when they crushed
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the worldwide economy.
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The only way that Wall Street will change, is if executives face jail time when they
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preside over massive frauds.
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We need tough, new laws to hold corporate executives personally accountable and we need
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tough prosecutors who have the courage to go after people at the top.
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Until then, it will be business as usual.
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And at giant banks like Wells Fargo, that seems to be cheating as many customers, investors
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and employees as they possibly can.
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Thank You, Mr. Chair.
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Mr. Stumpf, as you know, some of my colleagues and I sent you a letter last week about the
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board's plans to claw back compensation from senior executives who are responsible for
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overseeing this scam.
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Wells Fargo provided us with a response yesterday, I noticed that although we sent the letter
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to you, that the response actually came from somebody else in the company, which I guess
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is another example of holding yourself accountable.
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I wanna focus now, on the mysterious circumstances surrounding Carrie Tolstedt's retirement in July.
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As you know, Ms. Tolstedt ran the community banking division, the division where this
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scam occurred for the entire time that this scam took place.
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She was in charge of all the 5,300 employees who were fired and she oversaw the creation
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of 2 million fake accounts.
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Now, in July of this year just two months before the settlement was announced and before
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those facts became public, Ms. Tolstedt retired at age 56.
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You indicated in the letter, responding to our letter, that she walks away with over
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$90 million in stocks, stock options and awards.
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Fortune Magazine says it's actually about $125 million.
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But -- and here's the key part -- according
to Fortune, if Ms. Tolstedt has been fired
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instead of retiring, she would've had to
forfeit as much as $45 million of that award.
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Mr. Stumpf, the response to our letter confirms that knew of this scandal.
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Before Ms. Tolstedt retired, it said -- and this is from your letter, quote, "Senior management
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and the board were aware of the pending litigation, investigation and discussions with our regulators,
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relating to sales practices when Ms. Tolstedt indicated her decision to retire."
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Is that accurate, Mr. Stumpf, what this letter says?
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Were you personally aware of the massive problem that occurred under Ms. Tolstedt's watch in
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July when she announced her retirement?
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STUMPF: I was aware that we were involved in discussions with the city attorney, the
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OCC and the CFPB, yes.
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WARREN: So you had some indication there was a massive problem?
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STUMPF: We had some indication that we had one percent of our people who were doing the
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wrong thing.
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(CROSSTALK)
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WARREN: Also known as a massive problem.
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STUMPF: Well...
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WARREN: If you knew this, did you consider firing Ms. Tolstedt before she retired?
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STUMPF: Well, at the time she was reporting to our president and chief operating officer
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and...
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(CROSSTALK)
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WARREN: It's a simple question, you knew there was a problem, did you consider firing her?
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STUMPF: No because of her full...
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WARREN: Seriously?
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You found out that one of your divisions had created 2 million fake accounts, had fired
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thousands of employees for improper behavior and had cheated thousands of your own customers
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and you didn't even once consider firing her
ahead of her retirement?
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STUMPF: In fact, when I look at her full body of work and I look at the -- at the customer
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loyalty improvement and the customer service improvement...
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(CROSSTALK)
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WARREN: Are you sure that those were not fake?
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STUMPF: All the work that was done, she chose to retire and I'd also like to make one other
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comment because you made...
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(CROSSTALK)
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WARREN: So -- so you -- no just on this, you never considered firing her.
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So now Ms. Tolstedt has apparently retired but is also staying with the firm through
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the end of the year.
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And in the response to our letter, you state -- or the person writing it -- states, quote,
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"Ms. Tolstedt is eligible to be considered for a 2016 annual incentive award."
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An incentive award for doing a great job in 2016?
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Mr. Stumpf, that is unbelievable.
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You are the chairman of the board and the
CEO.
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In those roles, do you think it would be appropriate for Ms. Tolstedt to get another bonus on top
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of the millions that she has already gotten as a reward for her role in this massive scam?
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STUMPF: The board will consider that and I don't wanna prejudice the board but I also
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want to make one comment...
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(CROSSTALK)
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WARREN: I don't understand that answer.
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WARREN: You know, you and your board have already made changes.
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You've made changes to the compensation scheme for thousands of employees.
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You've sat here today and talked about that.
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You've removed sales quotas, I think you've
told us.
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You've reformed incentives.
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Why can that be done quick as a wink across the entire bank but a question about cutting
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compensation for a highly placed executive who oversaw a massive fraud takes long deliberation?
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Why is that?
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STUMPF: Because there's a board governance
process and we want that to work properly.
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And whether Carrie was retired or she was
fired there'd be no difference with respect
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to how the board can deal with that.
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WARREN: I'm sorry if she was fired, it is my understanding she would not be entitled
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to large parts of her compensation.
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This is not just a claw back issue we're talking about she doesn't get them to begin with if
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she gets fired.
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But you let her walk out of the door with a retirement.
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I don't quite understand.
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How do you explain this to your own shareholders?
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STUMPF: There is a process that the board goes through and they will do that.
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They've already met...
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WARREN: Mr. Stumpf...
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STUMPF: ... and everyone give that their...
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WARREN: I don't understand.
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You keep saying there's, you know, the board, the board, as if these are strangers that
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you met in a dark alley.
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Under the bylaws of Wells Fargo and I'm quoting here: "The Chairman shall preside at all meetings
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of the board."
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STUMPF: (inaudible)
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WARREN: You were able to make changes.
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Why can you not make a change here?
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STUMPF: I'm not on the Human Resources Committee of the board.
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They have their own governance and structure.
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We want that to proceed in the process in which we have.
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WARREN: All right so we'll do this your way.
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Our letter asked a number of questions about claw backs of Ms. Tolstedt's and other executive's
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pay, including yours.
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Wells Fargo's answer to our letter was just basically, you punted, that the decision would
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be up to the board.
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The same punt you've given here.
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So you're the Chairman of the Board, let me ask it this way: will you personally support
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clawing back all or part of Ms. Tolstedt's pay?
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STUMPF: I'm not going to in any way try to influence or prejudice the board as they do
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their deliberation.
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WARREN: So you have absolutely no opinion on this?
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STUMPF: I'm not going to opine on that--
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WARREN: You're not going to opine.
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You're going to say get out there, defraud, cheat, lie, steal, and I have nothing to say
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about whether or not you ought to still be getting your bonus?
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STUMPF: I never said, and I would, we'd never say as our company, go out there and do any
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of those things.
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We try to do the right thing every day.
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WARREN: But you say if you do them, you can count on Chairman Stumpf not to stand up and
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say you shouldn't get your incentive bonus.
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STUMPF: The board has a process...
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WARREN: I think you started this whole thing by saying, don't tell me what you say, tell
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me what your actions are.
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And your actions are, people do this and you're not going to take a single step to shut it down.
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So I guess I can ask this question again: will you personally support clawing back any
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or all of the pay for the person in charge of compliance? Someone we haven't talked about
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much today.
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The person who is supposed to be responsible to make sure that the bank is following the law.
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Will you have any recommendation about that person?
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STUMPF: I'm going to have the board do their process.
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WARREN: You are going to have no recommendation at all?
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STUMPF: I...
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WARREN: Ever?
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At any point in this process?
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STUMPF: Whatever the board accepts, whatever they do I will accept and I will support.
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WARREN: You are not passive here.
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If you have nothing to do then what are you doing serving as Chairman of the Board?
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If you have no opinions on the most massive fraud that has hit this bank since the beginning
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of time how can it be that you actually get to continue to collect a paycheck for being
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Chairman of the Board?
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STUMPF: Well first of all, I disagree with the fact this is a massive fraud.
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But secondly the board will do their work and I'm not going to prejudice their work.
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And I will accept whatever they come up with and I will be supportive.
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WARREN: Now, I, you accepted all along as this fraud built up, this massive fraud, you
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accepted all of the performance bonuses based on the cross selling that is at the heart
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of this.
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You watched your own stock go up by more than $200 million based in part on exactly this
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massive fraud.
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You got out and you pumped it to Wall Street and you said to Wall Street, hey we are doing
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such a great job cross-selling here at Wells Fargo, you should tell everybody to buy our stock.
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And now you turn around and say I shall remain passive and simply accept what Wells Fargo
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wants to do.
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You know, in 2008, Wall Street promised change.
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But it looks like it is business as usual.
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A giant bank cheats the little guys and the executives line their own pockets.
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Mr. Stumpf you make it clear that Wall Street won't change until we make it change.
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Thank you Mr. Chair.
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