A couple of months since the Wells Fargo fake account scandal broke, Warren Buffett is breaking his silence, telling CNN that Wells Fargo made a “terrible mistake” by maintaining its sales goals.
According to the report, Buffett said the sales goals were enough to corrupt people. “It was a dumb incentive system,” Buffett said, noting that Wells Fargo created a culture that “produced bad behavior.”
Nevertheless, Buffett didn’t unload any shares of Wells Fargo in the wake of the scandal and said he still has faith in the company, calling it an “incredible institution.” Buffett owns 2 million shares of Wells Fargo, the report noted. He is the largest shareholder in the embattled bank through Berkshire Hathaway. Buffett said he wouldn’t be surprised if Wells Fargo isn’t the only company he has a holding in that has problems. “It’s not my job to run those companies,” he said.
Earlier this fall, the Consumer Financial Protection Bureau fined Wells Fargo $185 million, the largest fine levied from the government agency. It also ordered Wells Fargo to refund $5 million in fees that the bank wrongly charged customers. According to an investigation by the CFPB, Wells Fargo employees not only made fake deposit accounts but also submitted 565,443 unauthorized credit card account applications on behalf of unknowing customers. It’s estimated that 14,000 of those accounts accrued $403,145 in fees. Through its own independent investigation, the bank discovered a total of $2.6 million in unauthorized fees. Since then, the company’s CEO, John Stumpf, was forced to step down.
Wells Fargo may have been telling employees not to make fake accounts as early as mid-2014, but at the same time, the bank still had sales goals in place that created a culture where employees continued to create bogus accounts. Former employees were quoted in media reports saying the reason they continued to break the rules was because Wells Fargo continued to push the sales goals. What’s more, the paper reported that those sales goals, which got the bank in trouble, won’t be phased out for another three months.