Senators call for DOJ investigation of Wells Fargo executives

Will execs face prosecution for 2 million fake accounts?

One of the biggest criticisms of the federal government’s response to the financial crisis was that the massive settlements with some of the nation’s largest banks for the malfeasance that led to the recession did not go far enough.

Many questioned the government’s inability (or unwillingness) to pursue prosecution against the individuals who led those companies.

That was all supposed to change when the Department of Justice announced last year that it planned to begin targeting individual employees for corporate misconduct in addition to the companies themselves.

Now, a group of senators are asking the DOJ to put that new policy to work and investigate, and perhaps even prosecute, executives at Wells Fargo for the fake account scandal that’s enveloped the bank.

The senators state that the DOJ is already investigating Wells Fargo, but urge the DOJ to “thoroughly investigate the culpability of senior executives at the bank.”

In a letter sent Tuesday to Attorney General Loretta Lynch, 12 senators, including one of Wells Fargo’s loudest critics on Capitol Hill, Sen. Elizabeth Warren, D-Massachusetts, call on the DOJ to put an end to the “two-tiered system” that would land a teller in jail for stealing money from the cash drawer, but allows executives to walk away relatively unscathed.

“Americans are rightly frustrated when they see that justice for the wealthy and powerful is very different than justice for everybody else,” the senators write.

“(The bank teller) can’t hide behind an army of lawyers and corporate policies that diffuse accountability for those at the top,” the senators continue.

“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,” the senators write. “It’s no wonder that Americans are skeptical of the effectiveness of our criminal justice system.”

In addition to Warrant, the letter is also signed by Sens. Tammy Baldwin, D-Wisconsin; Richard Blumenthal, D-Connecticut; Richard Durbin, D-Illinois; Al Franken, D-Minnesota; Kirsten Gillibrand, D-New York; Mazie Hirono, D-Hawaii; Angus King, I-Maine; Amy Klobuchar, D-Minnesota; Patrick Leahy, D-Vermont; Ed Markey, D-Massachusetts; Jeff Merkley, D-Oregon; Bernie Sanders, I-Vermont; and Ron Wyden, D-Oregon.

In the letter, the senators say that the Wells Fargo situation presents a “critical test” of the DOJ’s promise to “strengthen its pursuit of individual corporate wrongdoing” and to “focus on individuals” when investigating corporate misconduct.

“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,” the senators write. “That’s why the Wells Fargo investigation is so important.”

The senators suggest that the testimony of Wells Fargo CEO John Stumpf before the Senate Banking Committee and the House Financial Services Committee did little to disprove that he and other senior executives at Wells Fargo knew about the fake account issue before it became public knowledge but still did not do enough to stop it from continuing to happen.

“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,” the senators write. 

“Instead, he continued to personally benefit by pitching Wells’ inflated retail account numbers to investors,” the senators continue.

“But these facts raise questions about whether senior executives, including Mr. Stumpf, knowingly allowed illegal conduct to continue,” the senators 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.’”

The senators admit that they are “not in a position to determine if any of the senior executives at Wells Fargo committed criminal conduct,” but call for the DOJ to investigate and prosecute executives if it determines prosecution is the proper course of action.

“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,” the senators conclude. “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.”