Chairman of Berkshire Hathaway Inc. and billionaire investor Warren Buffett criticized Wells Fargo’s leadership Saturday for lackluster handling of a firm-wide sales scandal that affected thousands of customers across the U.S.
Wells instituted a system in which sales goals “incentivized the wrong type of behavior,” Buffet said Saturday at Berkshire’s annual meeting in Omaha. The billionaire investor puts a great deal of the blame of Wells’ former-CEO John Stumpf, who Buffett says acted far too late in stopping the fraudulent scheme.
“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. “The main problem was they didn’t act when they learned about it.”
A spokesman for Wells Fargo reportedly agreed with Buffett’s assessment, and wanted to assure the billionaire that the firm has taken “decisive actions” to remedy the problem for both employees and customers.
Buffett’s Berkshire Hathaway is the largest investor in the American bank, holding a 10 percent stake in Wells Fargo worth nearly $27 billion.
Wells Fargo landed in hot water in September when it was uncovered that the bank was participating in illegal retail lending practices.
Bank employees issued 565,000 lines of credit and opened 1.5 million bank accounts for customers without their consent from 2011-2014, and sometimes created false email addresses to sign them up for banking services in order to pad their numbers. Some 14,000 of those credit accounts accrued over $400,000 in fees alone. (RELATED: DOJ Demands Wells Fargo Whistleblower Testify In Formal Investigation)
Initially, the Consumer Financial Protections Bureau (CFPB) slapped Wells with a $185 million fine— the largest ever levied by the federal agency — after finding these practices were rampant throughout Wells Fargo since 2011. (RELATED: CFPB Fines Wells Fargo $185 Million For Opening Fake Accounts)
Stumpf faced congressional investigation, which ultimately led Wells’ board to force the executive to cough up $41 million in assets and earnings he accrued from his decades-long tenure. The move, however, proved not harsh enough for members of Congress and the public. Stumpf announced he was stepping down as chairman and CEO Oct. 12.
The new CEO of Wells Fargo, Tim Sloan, took over for Stumpf in December.
Wells has been on a campaign to regain consumer trust and confidence, even going so far as to directly contact those hurt by the sales scandal. The bank has made almost 200,000 calls to customers since news broke about the scandal in August, with only about one-fifth have responded. (RELATED: Wells On Quest To Make Good After Sales Scandal)
Wells has taken other more direct measures at the company itself, including firing over 5,000 employees and changing compensation packages for employees.
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