(CN) — Two members of Wells Fargo’s board have resigned in the wake of a congressional report that showed the bank failed to respond to consumer abuses for more than a decade.
The bank announced Monday morning that Elizabeth A. Duke and James H. Quigley both tendered their resignations Sunday. Both had served in leadership roles and on numerous committees during their tenure.
Wells Fargo CEO Charlie Scharf said in a statement that Duke and Quigley “helped the board navigate significant challenges relating to the sales practices issues, and they began the hard work of instituting necessary changes in leadership, governance, compensation programs and our business model.”
But a 113-page report issued last week by the House Financial Services Committee paints the work of Wells Fargo’s leadership — with an emphasis on Duke and Quigley — in a much different light.
“Wells Fargo’s board and management repeatedly have failed to demonstrate that the bank can establish a compliance management infrastructure capable of preventing consumer abuses,” the report states, citing numerous violations ranging from racial discrimination and wrongful foreclosure to illegal vehicle repossession and fraudulently opened accounts, which was the focus of a highly publicized scandal.
The report also says the House committee’s review of internal Wells Fargo records “reveals that too often the bank focused on profits and exiting the regulators’ consent orders rather than on fixing the bank’s long-standing compliance management weaknesses.”
Both Duke and Quigley are named throughout the report, which found that the two failed to address congressional demands for plans following the 2016 reveal of a long-running scam that created phony accounts for existing customers without their permission.
“Duke questioned the CFPB's practice of including her on letters requesting the bank take certain actions: ‘Why are you sending it to me, the board, rather than the department manager?’” the report states, using an abbreviation for Consumer Financial Protection Bureau. “‘This is reflective of [a] previous comment [Duke] made in early 2017’ that she couldn’t get between the regulators and the bank attorneys when the CFPB experienced difficulties with the bank’s outside counsel.”
Quigley, meanwhile, blew off meetings with regulators to take tropical vacations, according to the report.
“I am currently scheduled to be in the Galapagos Islands on these dates. I have made arrangements to have a satellite phone available during these days,” according to an email cited in the report that Quigley sent after regulators requested a meeting in February 2019. “I will do my best to participate, but I am not certain on the stability of communications in that part of the world.”
The report goes on to detail consent orders the bank entered with the CFPB over the last five years. It cites testimony provided by the bank’s former CEO, Timothy J. Sloan, in which he said Wells Fargo was in compliance with the orders. Almost immediately following that statement, however, the Office of the Comptroller of the Currency sent a letter to the bank criticizing its failures to comply with said orders.
“We continue to be disappointed with [Wells Fargo’s] performance under our consent orders and its inability to execute effective corporate governance and a successful risk management program,” the letter states, according to a Wall Street Journal article cited in the report. “We expect national banks to treat their customers fairly, operate in a safe and sound manner, and follow the rules of law.”
Duke and Quigley said in a statement Monday that they believe their decision to step down “will facilitate the bank’s and the new CEO’s ability to turn the page and avoid distraction that could impede the bank’s future progress.”
“Since we were made aware of the egregious harms suffered by Wells Fargo’s customers, we were and remain fiercely determined to do right by them and to strengthen the bank’s culture and controls,” they said. “We have made these our top priorities. In addition, we hired new external leadership with the ability to be an effective change-agent, which we found with our CEO, Charlie Scharf.”
Wells Fargo reports about $1.9 trillion in assets, making it the fourth largest bank in the country. It is also the largest home mortgage lender in the nation.
Thanks to low-risk investments made leading up to the 2008 recession, the bank was considered one of the more stable financial institutions in the country. Since then, however, it has dealt with repeated scandals that have often put it at odds with regulators.
Last month, Wells Fargo agreed to pay $3 billion to resolve criminal and civil claims involving excessive and unrealistic sales goals that led employees to falsify records and create the fake customer accounts to meet them.
The bank acknowledged that for over a decade, its employees engaged in “gaming” practices in which they used existing customer data to engage in a number of fraudulent activities, such as opening new accounts and lines of credit without customer consent. The employees moved large sums of money to unauthorized accounts, created fake pin numbers and even forged customer signatures in the scheme, according to a statement of facts accompanying a deferred prosecution agreement.
Congresswoman Maxine Waters, D-Calif., chairwoman of the House Financial Services Committee, had called for Quigley and Duke’s resignation in a press call last week.
“Strong boards are essential to strong governance,” she reportedly said. “They should be shown the door.”
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