Sen. Elizabeth Warren explained on Wednesday where the Department of Justice and the Securities and Exchange Commission should look to see if Wells Fargo CEO John Stumpf violated accountability laws.
During a joint press call with Pennsylvania Democratic Senate candidate Katie McGinty, Warren told Business Insider that an investigation could reveal Stumpf “not only crossed the line morally, he crossed a line criminally” — that is, if he knowingly misled investors about the strength of his company while thousands of employees were creating accounts without customers’ knowledge to keep up with aggressive sales incentives.
Wells Fargo and Stumpf have recently come under fire for 2 million accounts that were opened by employees of the bank without the knowledge of customers between 2011 and 2015. In the Senate hearing Tuesday, Stumpf said he became aware of the opening of fake accounts in 2013, when it was brought to him by lower-level executives.
During a fiery exchange in the hearing Tuesday, Warren suggested that Stumpf had not only failed customers, but may have also violated laws.
“You should resign, you should give back the money you made while this scam was going on, and you should be criminally investigated by the Department of Justice and the Securities and Exchange Commission,” Warren told Stumpf during the hearing.
Warren told Business Insider on Wednesday that while there are “several rules the departments should look into,” the DOJ should investigate whether Stumpf violated the 2002 Sarbanes-Oxley Act (SOX Act), which requires CEOs to sign the accounting statements and personally certify their accuracy.
“With a massive fraud going on at Wells Fargo, it would certainly be worth investigation to see if the documents he signed under penalty of perjury are in fact accurate,” Warren said.
The SOX Act came about after financial scandals in the late 1990s and 2000s, such as with Enron and WorldCom, in which cases executives signed off on financial statements that contained fraudulent or misleading information. Essentially, Warren argued that Stumpf signed off on financial statements that could have contained revenue from fees and cross-selling that he knew did not exist and did not disclose this risk.
Warren also advised the SEC to examine whether Stumpf knowingly pumped up the stock with investors and analysts anyway after learning of the fake accounts and analysts, which Warren argued constituted a violation not to mislead the company’s investors.
“When Wells Fargo cheated its customers, it also cheated investors,” Warren said.
She added: “If Mr. Stumpf misled those investors bought that stock, drove that price up, that would involve security violation.”
Wells Fargo did not immediately return a request for comment.
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