warren: thank you, mr. chairman. mr. stumpf, the wells fargo vision and valuesstatement -- which you frequently cite -- says: "we believe in values lived not phrases memorized. if you want to find out how strong a company'sethics are, don't listen to what its people say, watch what they do."
is dark roast coffee stronger than light roast, so let's do that. since this massive years-long scam came tolight, you have said repeatedly, "i am accountable." but what have you actually done to hold yourselfaccountable? have you resigned as ceo or chairman of wellsfargo?
stumpf: the board, i serve at the... warren: have you resigned? stumpf: no i've not. warren: all right. have you returned one nickel of the millionsof dollars that you were paid while this scam was going on? stumpf: well first of all this was by 1 percentof our people... warren: that's not my question... stumpf: and, and...
warren: my question, it's about responsibility. stumpf: the board will take care of that. warren: have you returned one nickel of themoney you earned while this scam was going on? stumpf: and the board will do... warren: i will take that as a no then. have you fired a single senior executive? and by that i don't mean a regional manageror branch manager. i'm asking about the people who actually ledyour community banking division or your compliance division?
stumpf: we've made a change in our regional,to lead our regional bank.... warren: i just said, i'm not asking aboutregional managers, i'm not asking about branch managers, i'm asking if you have fired seniormanagement. the people you actually led community bankingdivision, who oversaw this fraud, or the compliance division that was in charge of making surethat the bank complied with the law? stumpf: carrie tolstedt... warren: did you fire any of those people? stumpf: no. warren: no.
ok. so you haven't resigned. you haven't returned a single nickel of yourpersonal earnings. you haven't fired a single senior executive. instead evidently your definition of accountableis to push the blame to your low-level employees who don't have the money for a fancy pr firmto defend themselves. it's gutless leadership. in your time as chairman and ceo, wells hasbeen famous for cross-selling -- which is pushing existing customers to open more accounts.
cross-selling is one of the main reasons thatwells has become the most valuable bank in the world. wells measures cross-selling by the numberof different accounts a customer has with wells. other big banks average fewer than three accountsper customer. but you set the target at eight accounts. every customer of wells should have eightaccounts with the bank. and that's not because you ran the numbersand found that the average customer needed eight banking accounts. it is because "8 rhymes with great." this was your rationale right there in your2010 annual report.
cross-selling isn't about helping customersget what they need. if it was, you wouldn't have to squeeze youremployees so hard to make it happen. no, cross-selling is all about pumping upwells' stock price isn't it? cross-selling is shorthand for deepening relationships. we -- what we do well... warren: whoa, let me stop you right there. you say no? no? stumpf: i -- i...
warren: here are the transcripts of 12 quarterlyearnings calls that you participated in from 2012 to 2014, the 3 full years in which weknow this scam was going on. i'd like to submit them for the record, ifi may, mr. chair. thank you. these are calls where you personally, madeyour pitch to investors and analysts about why wells fargo is a great investment. and in all 12 of these calls, you personallycited wells fargo's success at cross-selling retail accounts as one of the main reasonsto buy more stock in the company. let me read you a few quotes that you had.
april 2012, quote, "we grew our retail bankingcross-sell ratio to a record, 5.98 products per household." a year later, april 2013, quote, "we achievedrecord retail banking cross-sell of 6.1 products april 2014, quote, "we achieved record retailbanking cross-sell of 6.17 products per household." the ratio kept going up and up. and it didn't matter whether customers usedthose accounts or not. and guess what? wall street loved it. here, is just a sample of the reports fromtop analysts in those years, all recommending
that people buy wells fargo stock in partbecause of the strong cross-sell numbers. and i'd like to submit them for the record. shelby: without objections. warren: thank you, mr. chair. so when investors saw good cross-sell numbers-- they did, while this scam was going on -- that was very good for you personally,wasn't it, mr. stumpf? do you know how much money, how much valueyour stock holdings in wells fargo gained while they scam was under way? stumpf: well, first of all, it was not a scam.
and cross-sell is a way of deepening relationships. when customers... (crosstalk) warren: we've been through this, mr. stumpf. i asked you a very simple question. do you know how much the value of your stockwent up while this scam was going on? stumpf: it's all of my compensation is inour public stock... warren: do you know how much it was? stumpf: it's all in the public filing.
warren: you're right, it is all in the publicrecords because i looked it up. while this scam was going on, you personallyheld an average of 6.75 million shares of wells stock. the share price during this time period wentup by about $30 which comes out to more than $200 million in gains all for you personally. and thanks, in part, to those cross-sell numbersthat you talked about on every one of those calls. you know, here's what really gets me aboutthis, mr. stumpf. if one of your tellers took a handful of $20bills out of the crash drawer, they'd probably be looking at criminal charges for theft.
they could end up in prison. but you squeezed your employees to the breakingpoint so they would cheat customers and you could drive up the value of your stock andput hundreds of millions of dollars in your own pocket. and when it all blew up, you kept your job,you kept your multimillion dollar bonuses and you went on television to blame thousandsof $12-an-hour employees who were just trying to meet cross-sell quotas that made you rich. this is about accountability. you should resign.
you should give back the money that you tookwhile this scam was going on and you should be criminally investigated by both the departmentof justice and the securities and exchange commission. this just isn't right. a cashier who steals a handful of $20s isheld accountable, but wall street executives who almost never hold themselves accountable,not now and not in 2008 when they crushed the worldwide economy. the only way that wall street will change,is if executives face jail time when they preside over massive frauds.
we need tough, new laws to hold corporateexecutives personally accountable and we need tough prosecutors who have the courage togo after people at the top. until then, it will be business as usual. and at giant banks like wells fargo, thatseems to be cheating as many customers, investors and employees as they possibly can. thank you, mr. chair. mr. stumpf, as you know, some of my colleaguesand i sent you a letter last week about the board's plans to claw back compensation fromsenior executives who are responsible for overseeing this scam.
wells fargo provided us with a response yesterday,i noticed that although we sent the letter to you, that the response actually came fromsomebody else in the company, which i guess is another example of holding yourself accountable. i wanna focus now, on the mysterious circumstancessurrounding carrie tolstedt's retirement in july. as you know, ms. tolstedt ran the communitybanking division, the division where this scam occurred for the entire time that thisscam took place. she was in charge of all the 5,300 employeeswho were fired and she oversaw the creation of 2 million fake accounts. now, in july of this year just two monthsbefore the settlement was announced and before
those facts became public, ms. tolstedt retiredat age 56. you indicated in the letter, responding toour letter, that she walks away with over $90 million in stocks, stock options and awards. fortune magazine says it's actually about$125 million. but -- and here's the key part -- accordingto fortune, if ms. tolstedt has been fired instead of retiring, she would've had toforfeit as much as $45 million of that award. mr. stumpf, the response to our letter confirmsthat knew of this scandal. before ms. tolstedt retired, it said -- andthis is from your letter, quote, "senior management and the board were aware of the pending litigation,investigation and discussions with our regulators,
relating to sales practices when ms. tolstedtindicated her decision to retire." is that accurate, mr. stumpf, what this lettersays? were you personally aware of the massive problemthat occurred under ms. tolstedt's watch in july when she announced her retirement? stumpf: i was aware that we were involvedin discussions with the city attorney, the occ and the cfpb, yes. warren: so you had some indication there wasa massive problem? stumpf: we had some indication that we hadone percent of our people who were doing the wrong thing.
warren: also known as a massive problem. stumpf: well... warren: if you knew this, did you considerfiring ms. tolstedt before she retired? stumpf: well, at the time she was reportingto our president and chief operating officer and... warren: it's a simple question, you knew therewas a problem, did you consider firing her? stumpf: no because of her full... warren: seriously? you found out that one of your divisions hadcreated 2 million fake accounts, had fired
thousands of employees for improper behaviorand had cheated thousands of your own customers and you didn't even once consider firing herahead of her retirement? stumpf: in fact, when i look at her full bodyof work and i look at the -- at the customer loyalty improvement and the customer serviceimprovement... warren: are you sure that those were not fake? stumpf: all the work that was done, she choseto retire and i'd also like to make one other comment because you made... warren: so -- so you -- no just on this, younever considered firing her. so now ms. tolstedt has apparently retiredbut is also staying with the firm through
the end of the year. and in the response to our letter, you state-- or the person writing it -- states, quote, "ms. tolstedt is eligible to be consideredfor a 2016 annual incentive award." an incentive award for doing a great job in2016? mr. stumpf, that is unbelievable. you are the chairman of the board and theceo. in those roles, do you think it would be appropriatefor ms. tolstedt to get another bonus on top of the millions that she has already gottenas a reward for her role in this massive scam? stumpf: the board will consider that and idon't wanna prejudice the board but i also
want to make one comment... warren: i don't understand that answer. warren: you know, you and your board havealready made changes. you've made changes to the compensation schemefor thousands of employees. you've sat here today and talked about that. you've removed sales quotas, i think you'vetold us. you've reformed incentives. why can that be done quick as a wink acrossthe entire bank but a question about cutting compensation for a highly placed executivewho oversaw a massive fraud takes long deliberation?
why is that? stumpf: because there's a board governanceprocess and we want that to work properly. and whether carrie was retired or she wasfired there'd be no difference with respect to how the board can deal with that. warren: i'm sorry if she was fired, it ismy understanding she would not be entitled to large parts of her compensation. this is not just a claw back issue we're talkingabout she doesn't get them to begin with if she gets fired. but you let her walk out of the door witha retirement.
i don't quite understand. how do you explain this to your own shareholders? stumpf: there is a process that the boardgoes through and they will do that. they've already met... warren: mr. stumpf... stumpf: ... and everyone give that their... warren: i don't understand. you keep saying there's, you know, the board,the board, as if these are strangers that you met in a dark alley.
under the bylaws of wells fargo and i'm quotinghere: "the chairman shall preside at all meetings of the board." stumpf: (inaudible) warren: you were able to make changes. why can you not make a change here? stumpf: i'm not on the human resources committeeof the board. they have their own governance and structure. we want that to proceed in the process inwhich we have. warren: all right so we'll do this your way.
our letter asked a number of questions aboutclaw backs of ms. tolstedt's and other executive's pay, including yours. wells fargo's answer to our letter was justbasically, you punted, that the decision would be up to the board. the same punt you've given here. so you're the chairman of the board, let meask it this way: will you personally support clawing back all or part of ms. tolstedt'spay? stumpf: i'm not going to in any way try toinfluence or prejudice the board as they do their deliberation.
warren: so you have absolutely no opinionon this? stumpf: i'm not going to opine on that-- warren: you're not going to opine. you're going to say get out there, defraud,cheat, lie, steal, and i have nothing to say about whether or not you ought to still begetting your bonus? stumpf: i never said, and i would, we'd neversay as our company, go out there and do any of those things. we try to do the right thing every day. warren: but you say if you do them, you cancount on chairman stumpf not to stand up and
say you shouldn't get your incentive bonus. stumpf: the board has a process... warren: i think you started this whole thingby saying, don't tell me what you say, tell me what your actions are. and your actions are, people do this and you'renot going to take a single step to shut it down. so i guess i can ask this question again:will you personally support clawing back any or all of the pay for the person in chargeof compliance? someone we haven't talked about much today. the person who is supposed to be responsibleto make sure that the bank is following the law.
will you have any recommendation about thatperson? stumpf: i'm going to have the board do theirprocess. warren: you are going to have no recommendationat all? stumpf: i... warren: ever? at any point in this process? stumpf: whatever the board accepts, whateverthey do i will accept and i will support. warren: you are not passive here. if you have nothing to do then what are youdoing serving as chairman of the board?
if you have no opinions on the most massivefraud that has hit this bank since the beginning of time how can it be that you actually getto continue to collect a paycheck for being chairman of the board? stumpf: well first of all, i disagree withthe fact this is a massive fraud. but secondly the board will do their workand i'm not going to prejudice their work. and i will accept whatever they come up withand i will be supportive. warren: now, i, you accepted all along asthis fraud built up, this massive fraud, you accepted all of the performance bonuses basedon the cross selling that is at the heart of this.
you watched your own stock go up by more than$200 million based in part on exactly this massive fraud. you got out and you pumped it to wall streetand you said to wall street, hey we are doing such a great job cross-selling here at wellsfargo, you should tell everybody to buy our stock. and now you turn around and say i shall remainpassive and simply accept what wells fargo wants to do. you know, in 2008, wall street promised change.
but it looks like it is business as usual. a giant bank cheats the little guys and theexecutives line their own pockets.
mr. stumpf you make it clear that wall streetwon't change until we make it change. thank you mr. chair.
