Elizabeth Warren: Here's how the Justice Department and SEC should criminally investigate Wells Fargo's CEO
(Sen. Elizabeth Warren questions Wells Fargo CEO John Stumpf during a hearing before the Senate banking committee.Lamar Salter)
Sen. Elizabeth Warren on Wednesday explained 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 the bank's employees opening 2 million accounts between 2011 and 2015 without the knowledge of customers. In the Senate hearing on Tuesday, Stumpf said he became aware of the openings of the fake accounts in 2013, when lower-level executives brought it up to him.
During a fiery exchange in the hearing, 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.
Warren told Business Insider on Wednesday that while there are "several rules the departments should look into," the Justice Department should investigate whether Stumpf violated the 2002 Sarbanes-Oxley Act, known as the SOX Act, which requires CEOs to sign 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 executives signed off on financial statements that contained fraudulent or misleading information. Warren argued, essentially, 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 company's stock with investors and analysts after learning of the fake accounts, which Warren argued constituted a securities law violation.
"When Wells Fargo cheated its customers, it also cheated investors," Warren said.
She added: "If Mr. Stumpf misled those investors who 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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