Billionaire investor Warren E. Buffett rebuked Wells Fargo’s handling of widespread illegal sales practices that spanned at least 15 years and included targeting undocumented immigrants to open new bank accounts.
Buffett said the San Francisco banking giant’s executives failed to act immediately after finding out that employees were creating countless fake and fraudulent bank accounts to meet the company’s unrealistic sales goals. Wells Fargo “incentivized the wrong type of behavior,” Buffett said Saturday during Berkshire Hathaway’s annual meeting in Omaha. The 86-year-old tycoon is Berkshire’s chairman.
“If there’s a major problem, the CEO will get wind of it. At that moment, that’s the key to everything. The CEO has to act,” Buffett said, according to Reuters. “The main problem was they didn’t act when they learned about it.”
Berkshire is Wells Fargo’s largest shareholder.
Buffett’s comments come shortly after former Wells Fargo employees revealed that they were forced to resort to unethical and illegal sales tactics to meet daily sales quotes. Last month, a law firm handling a shareholder lawsuit against Wells Fargo obtained sworn statements from former bank managers, personal bankers and tellers who talked about questionable practices they either engaged in or witnessed.
[Wells Fargo targeted undocumented immigrants, stalked street corners, lawsuit claims]
Some involved creating fake bank accounts with fictitious names, calling current and potential clients well after business hours, and opening multiple accounts for customers, including undocumented immigrants, without their authorization, according to court records.
Employees at Wells Fargo locations at several states scouted the streets, Social Security offices, construction sites and factories to find undocumented immigrants, take them to a local branch and persuade them to sign up for new accounts, court records say. Knowing that they needed a place to cash their checks, Wells Fargo employees urged them to open new accounts while promising to waive check-cashing fees that the immigrants would otherwise have to pay.
The more people signed up, whether it was for checking and savings accounts, credit and debit cards, online banking or overdraft protection, the better. If they signed up for all of the features, even better, the employees said. Each new account was considered a sale, and the more sales employees racked up, the better their future was with the company.
The employees said they reported the troubling practices to their superiors, but their concerns fell on deaf ears.
A six-month investigation by Wells Fargo’s board of directors recently found that the bad sales practices stretched as far back as 2002 — and former chairman and chief executive John Stumpf had known about them since.
Mark Folk, a spokesman, said in a statement that Wells Fargo agrees with Buffett’s statements and that the company has taken “decisive actions” to “make things right for customers.”
“We continue to make additional improvements in our Retail Bank operations and we have eliminated product sales goals and introduced a new compensation plan focused on customer experience for branch team members,” Ancel Martinez, another Wells Fargo spokesman, said in an earlier statement.
Folk said the company also has created a new Office of Ethics, Oversight and Integrity that now handles internal investigations and complaints.
[Wells Fargo orders two executives to pay back an additional $75 million after sales scandal probe]
The alarming statements from former employees are the latest in a massive scandal that continues to engulf Wells Fargo.
Stumpf resigned last year. Carrie Tolstedt, the executive in charge of Wells Fargo’s community banking division, also had left the company — with more than $120 million in retirement package. More than 5,000 low-level employees have been fired.
In September, the company was forced to pay $185 million in regulatory penalties after revelations that more than 2 million bank and credit card accounts were opened on behalf of customers without their knowledge. The fraudulent accounts netted more than $2 million in fees charged to customers for services they didn’t sign up for.
In February, Wells Fargo fired four executives as the company’s board of directors was completing an investigation into fake accounts believed to have been set up by low-level employees to meet sales quotas.
And in April, Wells Fargo ordered Stumpf and Tolstedt to pay a total of $75 million after the board’s investigation concluded.
The practices, which resulted in crumbling employee morale and labor lawsuits, first came to light after a 2013 report by the Los Angeles Times.
Renae Merle contributed to this story.