[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                    HOLDING WELLS FARGO ACCOUNTABLE:
                   EXAMINING THE ROLE OF THE BOARD OF
                   DIRECTORS IN THE BANK'S EGREGIOUS
                       PATTERN OF CONSUMER ABUSES

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 11, 2020

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-92
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
42-867 PDF                  WASHINGTON : 2021                     
          
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             ANN WAGNER, Missouri
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            SCOTT TIPTON, Colorado
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
DENNY HECK, Washington               TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
RASHIDA TLAIB, Michigan              DAVID KUSTOFF, Tennessee
KATIE PORTER, California             TREY HOLLINGSWORTH, Indiana
CINDY AXNE, Iowa                     ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois                JOHN ROSE, Tennessee
AYANNA PRESSLEY, Massachusetts       BRYAN STEIL, Wisconsin
BEN McADAMS, Utah                    LANCE GOODEN, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   DENVER RIGGLEMAN, Virginia
JENNIFER WEXTON, Virginia            WILLIAM TIMMONS, South Carolina
STEPHEN F. LYNCH, Massachusetts      VAN TAYLOR, Texas
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 11, 2020...............................................     1
Appendix:
    March 11, 2020...............................................    47

                               WITNESSES
                       Wednesday, March 11, 2020

Duke, Elizabeth A., Chair, Wells Fargo & Company.................     5
Quigley, James H., Independent Chairman, Wells Fargo Bank, N.A...     6

                                APPENDIX

Prepared statements:
    Duke, Elizabeth A............................................    48
    Quigley, James H.............................................    70

 
                    HOLDING WELLS FARGO ACCOUNTABLE:
                   EXAMINING THE ROLE OF THE BOARD OF
                   DIRECTORS IN THE BANK'S EGREGIOUS
                       PATTERN OF CONSUMER ABUSES

                              ----------                              


                       Wednesday, March 11, 2020

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:08 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Sherman, Meeks, Scott, Green, Cleaver, Perlmutter, 
Himes, Foster, Beatty, Vargas, Gottheimer, Gonzalez of Texas, 
Lawson, Tlaib, Porter, Axne, Casten, Wexton, Adams, Dean, 
Garcia of Illinois, Phillips; McHenry, Wagner, Lucas, 
Luetkemeyer, Huizenga, Stivers, Barr, Tipton, Williams, Hill, 
Emmer, Zeldin, Loudermilk, Davidson, Budd, Kustoff, Gonzalez of 
Ohio, Steil, Gooden, Riggleman, Timmons, and Taylor.
    Chairwoman Waters. The Financial Services Committee will 
come to order. Without objection, the Chair is authorized to 
declare a recess of the committee at any time.
    Today's hearing is entitled, ``Holding Wells Fargo 
Accountable: Examining the Role of the Board of Directors in 
the Bank's Egregious Pattern of Consumer Abuses.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    Today, we will receive testimony from Ms. Elizabeth Duke 
and Mr. James Quigley, whom, until earlier this week, served as 
the Chair of the board of directors of Wells Fargo & Company, 
and Wells Fargo Bank, respectively. Both have resigned after I 
called for their resignations following the release of a 
scathing Committee Majority staff's report on Wells Fargo's 
compliance failures, and their individual failures as board 
members.
    But their resignations do not absolve them of their 
failures. Directors at Wells Fargo and institutions across this 
country must understand that they are the last line of defense 
when it comes to protecting their company's shareholders, 
employees, and customers. And while Ms. Duke and Mr. Quigley 
said they resigned to ``avoid distraction,'' let me be clear. 
This is not a distraction. We are examining misconduct and 
dereliction of duty.
    Over the past decade, Wells Fargo's board, management, and 
regulators have all failed to fix the company's internal 
control weaknesses that caused enormous harm for millions of 
consumers throughout the country. The Majority staff's report 
examines Wells Fargo's compliance with five consent orders that 
required the company's board and management to clean up the 
systemic weakness that has led to widespread consumer abuses 
and compliance breakdowns. As board members, Ms. Duke and Mr. 
Quigley were responsible for ensuring that Wells Fargo's CEO 
and other management executed an effective program to manage 
those risks.
    However, the Majority staff report found that Wells Fargo's 
board failed to ensure management could competently address the 
risk management of deficiencies; allowed management to 
repeatedly submit materially deficient plans to address 
consumer abuses; prioritized financial considerations over 
fixing consumer abuses; and did not hold senior management 
accountable for repeated failures.
    The Majority staff's report also revealed attitudes and 
failures on the part of Ms. Duke and Mr. Quigley that are 
dismaying. When the Consumer Financial Protection Bureau (CFPB) 
included Ms. Duke's letters requesting actions from the bank, 
she responded by asking, ``Why are you sending it to me, the 
board, rather than the department manager?'' This was 
surprising to CFPB officials, and gives the appearance of a 
see-no-evil mentality from Ms. Duke and an unwillingness to 
exercise the oversight required of her as a member of the 
board.
    Mr. Quigley also did not appear to understand the gravity 
of his board responsibilities. When the Office of The 
Comptroller of the Currency (OCC) wanted to schedule a meeting 
with the bank's directors to discuss, ``progress and 
accountability,'' Mr. Quigley told other bank officials that he 
was, ``currently scheduled to be away on vacation in some 
islands on those dates,'' and commented that, ``the sense of 
urgency is surprising.''
    These statements were made after several public enforcement 
actions against Wells Fargo for massive consumer abuse 
scandals. While Ms. Duke and Mr. Quigley have resigned, they 
must be held accountable for the dereliction of their duties.
    I now recognize the ranking member of the committee, the 
gentleman from North Carolina, Mr. McHenry, for 4 minutes.
    Mr. McHenry. Thank you, Madam Chairwoman. Thank you for 
holding this hearing, and I want to thank our witnesses for 
voluntarily complying with the request of the committee to 
appear.
    Today's hearing and the legislative proposals attached to 
it would make Rahm Emanuel proud. He once said, ``You never 
want a serious crisis to go to waste.'' Well, make no mistake, 
Wells Fargo has been in crisis mode for awhile now. We will 
hear more about the makings of that crisis today from our 
witnesses. They had a front-row seat. They are a part of the 
problem in many respects.
    In that spirit, the Democrats followed Rahm Emanuel's 
advice and rolled out policy proposals that would do everything 
from expand the scope of CFPB's authority to automatically 
downsizing certain banks, and from those proposals, it has a 
complete lack of connection with evidence before us in the 
example of Wells Fargo.
    We found with Wells Fargo that the problem wasn't that the 
CFPB lacked certain authority; the problem was that the CFPB 
ignored a series of red flags at Wells Fargo. That was under 
Richard Cordray's leadership as Director of the CFPB. We found 
the problem wasn't that Wells Fargo is too-big-to-manage. The 
problem was that it was deeply mismanaged.
    My colleagues on the other side of the aisle also have some 
ideas about the standards to which we should hold board 
members. How about we start with the proper legal framework and 
the standards that shareholders and the courts use? So, let's 
start there. Let's walk through those.
    Under the law, members of a corporate board of directors 
owe three fiduciary duties: the duty of care; the duty of 
loyalty; and the duty of good faith. Those concepts aren't very 
complicated. Directors must be diligent, they must subordinate 
their personal interests beneath the interests of the company, 
and they have to act in the best interest of the shareholders. 
Those standards make sense because, at the end of the day, 
directors represent the interests of the shareholders.
    Shareholders expect the board to do three basic things: 
first, hold management accountable; second, push back when 
management provides incomplete or overly optimistic 
information; and third, make sure the company has the right 
leaders in place. It looks like, based on what we heard 
yesterday from Mr. Scharf, the board might have finally got 
that last one right, the question of leadership.
    But we have a lot of questions today about everything 
leading up to the board's decision to elect Mr. Scharf. We need 
to hear why the board chose a company insider to lead Wells 
Fargo back in 2016. We need to hear why the board failed to 
recognize that management wasn't fixing the company's problems. 
And we need to hear why the board stood behind that management 
team for so long, until the Trump Administration's regulators 
forced a change.
    I think there is a lot that we can learn to ensure that new 
decision-makers deliver on the much-needed changes to this 
institution. I look forward to your answers today about this 
history, and thank you, Madam Chairwoman, for hosting this 
hearing. I look forward to the questions.
    Chairwoman Waters. Thank you very much. I now recognize the 
gentleman from Texas, Mr. Green, who is also the Chair of our 
Subcommittee on Oversight and Investigations, for one minute.
    Mr. Green. Thank you, Madam Chairwoman. Madam Chairwoman, 
the evidence speaks for itself. I have an article styled, ``35 
bankers were sent to prison for financial crisis crimes.'' 
Bankers can go to jail. They can be held accountable. This is 
from CNN Business on April 28, 2016.
    Many of these crimes involved relatively small amounts of 
money at smaller banks. Smaller banks pay a price. Big banks 
pay off the government--$3 billion in fines paid by Wells 
Fargo, a bank that has demonstrated that it will commit fraud--
NBC News article, February 21, 2020.
    I also have an article that is styled, ``Violation Tracker 
Parent Company Summary.'' This is from Good Jobs. And the total 
amount of penalties that Wells Fargo has paid since 2000 
amounts to $17,296,835,949. The evidence speaks for itself. 
Wells Fargo has been running a criminal enterprise.
    Chairwoman Waters. I now recognize the subcommittee's 
ranking member, Mr. Barr, for one minute.
    Mr. Barr. Thank you, Chairwoman Waters and Ranking Member 
McHenry. Ms. Duke, Mr. Quigley, you will testify to the 
committee today in your capacity as former board members of 
Wells Fargo.
    Let me be clear about two things. First, it is clear that 
the board made some mistakes. We heard yesterday how important 
new leadership is to the company, and I think the board will 
also benefit from fresh perspectives.
    Second, decisions about whether certain directors should 
continue to serve are for shareholders to make. Congress should 
not substitute its judgment for theirs. The chairwoman's call 
for the witnesses to resign was inappropriate, and I am sorry 
you are here under these circumstances.
    The Republican staff report highlights a series of missteps 
by Wells Fargo's board since 2016, and I will address those in 
my questioning shortly.
    But right now, I wish to emphasize what the ranking member 
said yesterday: There are pressing issues affecting our economy 
that this committee should focus on. Instead, we are spending 
time, energy, and resources speaking to two former board 
members of a company whose CEO testified yesterday.
    I yield back.
    Chairwoman Waters. I want to welcome today's witnesses. 
Until earlier this week, Elizabeth Duke was the Chair of the 
board of directors of Wells Fargo & Company. Prior to joining 
Wells Fargo's board, Ms. Duke served in a number of positions, 
including as a member of the Board of Governors of the Federal 
Reserve System.
    Also, earlier this week, Mr. James Quigley served as both a 
director of Wells Fargo & Company and as the independent 
chairman of Wells Fargo Bank. Concurrently with his service as 
a director of Wells Fargo, and chair of Wells Fargo Bank, Mr. 
Quigley served, and continues to serve as the chairman of the 
board of Hess Corporation, and director of the board of 
Merrimack Pharmaceuticals.
    While Ms. Duke and Mr. Quigley no longer serve on Wells 
Fargo's board, it is my expectation that they will be 
forthcoming in their testimony and responses to Members' 
questions today. Without objection, all of the witnesses' 
written statements will be made a part of the record.
    Before we begin, I would like to swear in the witnesses. 
Ms. Duke and Mr. Quigley, please stand and raise your right 
hand.
    [Witnesses sworn.]
    Let the record show that the witnesses answered in the 
affirmative. You may sit now.
    Each of you will have 5 minutes to summarize your 
testimony. When you have one minute remaining, a yellow light 
will appear. At that time, I would ask you to wrap up your 
testimony so that we can be respectful of the committee 
members' time.
    Ms. Duke, you are now recognized for 5 minutes to present 
your oral testimony.

  TESTIMONY OF ELIZABETH A. DUKE, CHAIR, WELLS FARGO & COMPANY

    Ms. Duke. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, thank you for inviting us to testify 
at today's hearing.
    With heightened volatility in financial markets, a strong 
Wells Fargo is needed now more than ever. Transformational 
changes are getting traction inside the company with strong new 
leadership and management. I believe that today, the company 
has the right team and path forward to be fully deserving of 
the trust customers place in us every day.
    Over the past several days, however, it became clear to my 
colleague, Jim Quigley, and me that the recent attention on our 
leadership of the board could hinder the ability of the company 
and its new CEO to turn the page and focus on the future, and 
this company must move forward. For this reason, last Sunday we 
informed our board colleagues of our decision to resign, 
effective immediately. We are confident that the board has all 
the necessary experience and skill sets to smoothly manage the 
leadership transition.
    When I look at Wells Fargo today, I see a community bank 
that, under Mary Mack, focuses on customers rather than sales. 
I see a fully transformed board with structural changes that 
improve the board's governance and effectiveness. I see an 
executive management team that balances a new approach with 
institutional knowledge. I see a risk management team and a 
risk platform that is under construction from the ground up. 
And I see a CEO with the ability to execute on the significant 
remaining work necessary to meet the company's regulatory 
commitments.
    Ever since the board learned the truth about what was going 
on inside Wells Fargo, it has been continuously and deeply 
engaged in understanding the problems and their solutions and 
insisting on action. I served on the board committee that 
investigated sales practices. Not only was I appalled by the 
harm to customers but I was sickened to hear how our employees 
were treated by their managers. I started as a teller and a new 
accounts representative, and I identified with those employees.
    Our investigation of sales practices was thorough and 
unfettered. Our attorneys conducted 100 interviews, reviewed 
interview notes from over 1,000 more, and collected 35 million 
documents from over 300 custodians. We instructed them to brief 
regulators, government agencies, and the staff of this 
committee to assist in your own investigations.
    The appendix in my written testimony provides a comparison 
of our findings and those of the OCC, the SEC, and the DOJ.
    The work to truly and sustainably address the root causes 
of the problems we discovered in the company has taken time to 
implement, more time than anyone anticipated, and more time 
than any of us, especially the board of directors, would have 
liked. I get the frustration of this committee and our 
regulators. It comes through loud and clear in your reports.
    But I can assure you that nobody is more frustrated than we 
are that the bank has not yet satisfied the requirements of the 
consent orders we have entered into. As members of the 
committee overseeing consent order work, Jim and I reviewed 
progress reports and grilled staff and management about every 
detail on a monthly basis, and we are confident the board will 
continue to hold management accountable until the job is 
finished.
    Throughout our tenure on the board, however, we remain 
mindful that the board cannot supplant management in the 
administration of the enterprise. Consistent with widely 
accepted principles of corporate governance, the board's 
primary responsibilities are to oversee the company's 
management and business strategies, to select a well-qualified 
CEO, to monitor and evaluate the CEO's performance, and 
importantly, not to micromanage the company's business, 
including in its day-to-day execution of the consent order 
requirements.
    Recognizing the critical importance of the responsibility 
to select a well-qualified CEO, I appointed Jim to lead the CEO 
search that resulted in the hiring of Charlie Scharf. You heard 
from Charlie yesterday about his plans and timetables going 
forward. We know that our former colleagues on the board are 
determined to provide him the space and support to complete the 
work.
    We are no longer able to speak on behalf of Wells Fargo, or 
address questions about the company going forward. We are also 
constrained by the scope of regulators' waivers of their 
confidential supervisory privilege. But within those 
limitations, we are here to answer your questions to the best 
of our ability.
    Thank you.
    [The prepared statement of Ms. Duke can be found on page 48 
of the appendix.]
    Chairwoman Waters. Thank you. Mr. Quigley, you are now 
recognized for 5 minutes.

  TESTIMONY OF JAMES H. QUIGLEY, INDEPENDENT CHAIRMAN, WELLS 
                        FARGO BANK, N.A.

    Mr. Quigley. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, I am here to share my perspectives as 
a former member of the board of Wells Fargo on the bank's 
commitment to its customers to restore its brand and to realize 
its aspirational vision and purpose.
    As the committee is aware, I decided to resign from the 
board to permit the bank to turn the page and move forward with 
a focus on its future. I brought to my role as a Wells Fargo 
board member a deep conviction in the values of trust and 
confidence. I learned those from my parents, a forest ranger 
and a schoolteacher, and I took them with me to Deloitte where 
I rose to become the CEO.
    Restoring customer trust and confidence in Wells Fargo was 
our most important priority, after we learned of the egregious 
sales practices. In her written testimony, Ms. Duke has 
detailed many of the transformational changes that the board 
has overseen in our efforts to do everything possible to ensure 
that similar problems never happen again. And while there is 
more to be done, undeniably, I believe Wells Fargo is making 
progress.
    I would like to highlight two changes that are particularly 
important to me. First, the board oversaw a huge investment to 
strengthen the compliance function of Wells Fargo. One of my 
roles at Deloitte was leading the manufacturing group, so I 
understand the importance of zero defects. I know why it is 
critical to do it right the first time, and I carried that 
thinking with me to my governance and oversight role at Wells 
Fargo. I wanted zero customer harm. And if it ever occurred, I 
wanted it detected through the bank's control and monitoring 
processes and remediated as quickly as humanly possible.
    As you heard from Mr. Scharf yesterday, the bank's 
compliance teams have added more than 3,300 employees since the 
end of 2017, more than doubling the size of that function in 
less than 3 years.
    Second, the board encouraged and supported the changes in 
senior management of the bank, bringing new capability and 
stimulating cultural change. Since 2006, Wells Fargo has hired 
a new chief operating officer, chief risk officer, general 
counsel, chief auditor, chief compliance officer, head of HR, 
and head of technology. I personally devoted much of 2019 to 
leading the search for a new CEO, and I am confident that we 
selected the best candidate to lead the bank. Because I believe 
deeply in the critical role of culture in an organization like 
Wells Fargo, I was especially supportive of the culture Mr. 
Scharf is working to establish, one with clear priorities, 
best-in-class standards of operational excellence and 
integrity, a unified bank with clear line of sight across the 
business, accountability of management, and most important of 
all, a renewed commitment to completing the work of doing right 
by our customers and satisfying our regulators.
    The cultural and structural changes that are necessary to 
address the bank's challenges are far-reaching. We believe that 
getting those things right, and in a way that would provide 
lasting change, ultimately serves customers and employees 
better than doing them quickly. I believe the changes we 
oversaw will make Wells Fargo stronger, more reliable, and more 
deserving of customer trust. And while there is still more to 
do, I am confident the company is moving in the right 
direction.
    Because I am no longer a member of the company's board, I 
cannot speak for the board today. I have my personal 
reflections, including the importance of distinct and separate 
roles for management and the board. The board must oversee the 
company's management and business strategies, but it cannot 
replace or do the job of management. And that principle was 
critical to me during my tenure at Wells Fargo.
    In my testimony today, I must also respect the limits on my 
ability to disclose confidential bank supervisory information. 
The regulators have not provided full CSI waivers, and I need 
to be particularly careful to stay within the limits of the 
waivers we have received.
    Within those constraints, I look forward to answering the 
committee's questions.
    [The prepared statement of Mr. Quigley can be found on page 
70 of the appendix.]
    Chairwoman Waters. Thank you very much, and I appreciate 
your presence here today. I now recognize myself for 5 minutes 
for questions.
    Let me start by asking Ms. Duke, how many years have you 
served Wells Fargo on the board?
    Ms. Duke. Five years.
    Chairwoman Waters. Five years. Mr. Quigley, how many years?
    Mr. Quigley. Six years.
    Chairwoman Waters. Six years. Are you compensated for 
serving on the board?
    Ms. Duke. Yes, we are.
    Chairwoman Waters. How much is your compensation?
    Ms. Duke. My compensation in the last year was somewhere 
around $630,000.
    Chairwoman Waters. Six hundred and how much?
    Ms. Duke. --thirty thousand.
    Chairwoman Waters. Thirty thousand. Mr. Quigley, how much 
was your compensation?
    Mr. Quigley. $417,000 last year.
    Chairwoman Waters. Thank you very much. I want to get into 
the Majority staff's report. Ms. Duke, how did you prepare for 
today's hearing? Did you read the Majority staff's report?
    Ms. Duke. I did.
    Chairwoman Waters. Mr. Quigley, how did you prepare for 
today's hearing? Did you read the Majority staff's report?
    Mr. Quigley. Yes.
    Chairwoman Waters. Ms. Duke and Mr. Quigley, you stated 
that you resigned from the board, ``out of continued loyalty to 
Wells Fargo and ongoing commitment to serve our customers and 
employees,'' and to, ``avoid distraction that could impede the 
bank's future progress.''
    Ms. Duke, Mr. Quigley, notably absent from your resignation 
announcement is any acknowledgement of responsibility for the 
multitude of board failures documented in the Majority staff 
report. Do you disagree that as Board Chairs, you were 
responsible for the board's approval of poor quality consent 
order submissions and failure to hold ineffective leaders, like 
former CEO Tim Sloan, accountable?
    Ms. Duke?
    Ms. Duke. Thank you, Madam Chairwoman. I believe 
wholeheartedly that we both spent the time, used our judgment, 
did the inquiries, and did our job as thoroughly and as 
completely as we possibly could, and made decisions in 
accordance with our best judgment about what was the best 
course of action for the company. Our role in reviewing the 
consent order submissions was in reviewing them from a very 
high level. Any of the deficiencies that were in the details of 
those submissions are the responsibility of management.
    Chairwoman Waters. Thank you. Are you aware that Wells 
Fargo has paid out $17 billion since 2008, I believe, on 
settlements because of fraud, wrongdoing, and other kinds of 
problems at the bank? Are you aware of that?
    Ms. Duke. I would take that to be true. I don't know the 
total dollar amount.
    Chairwoman Waters. Mr. Quigley, how were you made aware of 
each of these problems that ended up in the hands of our 
regulators where Wells Fargo had to pay out these settlements? 
How did they come before the board? Did you know about each of 
them?
    Mr. Quigley. I was aware and I was informed as a result of 
being the chairman of the audit committee and the judgments 
that are required in preparing timely, reliable financial 
information, and the need to be able to estimate when an 
obligation is probable and measurable and needed to be 
recognized in those financial statements.
    I was also a member of the risk committee and a member of 
the regulatory compliance and oversight committee, and 
management was transparent with us as those items were maturing 
and moving forward.
    Chairwoman Waters. Weren't you shocked when time and time 
again, you were confronted with these scandals that were being 
presented to the board, and they continued right up through 
today?
    Mr. Quigley. The sales practice abuses were very troubling 
to me, and shocked perhaps is not an overstatement of how I 
felt when I was made aware that, in fact, those practices were 
something far more than had earlier been provided to us.
    Chairwoman Waters. Doesn't the Majority staff report 
demonstrate your dereliction of duty as board chairs to ensure 
that the company submitted comprehensive plans and met all of 
the requirements of the orders? Do you take responsibility for 
that?
    Mr. Quigley. I absolutely agree with what Ranking Member 
McHenry pointed out on what is the duty of care and what is the 
business judgment rule, and how can a board member be properly 
informed on matters that are clearly management responsibility. 
I emphasized, in my opening statement, that I believe effective 
governance requires clear separation between management and the 
board, and any time those lines get blurred, I believe the 
enterprise becomes less safe and less sound--
    Chairwoman Waters. So are you saying to me--
    Mr. Quigley. --and less accountable--
    Chairwoman Waters. --that you do not consider it a 
dereliction of your duty to Wells Fargo's shareholders and its 
customers in dealing with these consent orders? You are trying 
to talk now about making sure that there are clear lines 
between the board and management, and to separate yourself from 
some of the management responsibilities. Don't you think it was 
a dereliction of duties not to be on top of all of this?
    Mr. Quigley. I know what I have done as a board member of 
Wells Fargo, and I am comfortable with that work and the way 
that I performed that role. I did my very best. I could do 
nothing more, and the company deserved nothing less.
    Chairwoman Waters. Thank you. My time is up, and the 
gentleman from North Carolina, Ranking Member McHenry, is 
recognized for 5 minutes.
    Mr. McHenry. So, Mr. Quigley, you are in charge of the 
audit committee. There was never any question about the quality 
of the financial information provided? There are severe 
negative consequences for management decisions made and board 
decisions as it relates to management. So, let's get to this 
question of fiduciary duty.
    Ms. Duke, you were Chair of the Board, so I want to start 
with you. Mr. Quigley says the terminology I used on fiduciary 
duty for board members is approximately right. Do you agree?
    Ms. Duke. I do.
    Mr. McHenry. Okay. So, that responsibility to ensure that 
the company is managed appropriately is a key component of 
that.
    Ms. Duke. That is correct.
    Mr. McHenry. Okay. So the board's responsibilities under 
the consent orders that Chairwoman Waters mentioned--what was 
the board's responsibility under the consent orders?
    Ms. Duke. The board's responsibility under the consent 
orders was to review and make sure that the submissions were 
submitted and to review quarterly progress reports for 
submission to the regulators for the OCC and for the Federal 
Reserve. For the CFPB, the frequency was a little bit 
different, but it was the same responsibility.
    Mr. McHenry. What does it mean when a regulator rejects a 
submission made by the bank for material deficiencies?
    Ms. Duke. It means that the bank has to correct those 
deficiencies, has to address those issues.
    Mr. McHenry. Both the CFPB, in December 2019, and the OCC, 
in July of 2019, referred to deficiencies. It was based on the 
quality of the submissions. So, did the CFPB ever reject the 
bank's submissions?
    Ms. Duke. I don't remember receiving--
    Mr. McHenry. The answer is yes, they rejected--there has 
never been a submission to the CFPB that was fully accepted.
    Ms. Duke. We have never received a non-objection from the 
CFPB on the consent orders that were submitted.
    Mr. McHenry. Non-objection?
    Ms. Duke. That is the regulatory term.
    Mr. McHenry. Sure. There were deficiencies in the quality 
of submissions. Is that correct? Material deficiencies is the 
term. The answer is, yes.
    Ms. Duke. Yes.
    Mr. McHenry. Okay. Did the OCC ever reject the bank's 
submissions? Again, the answer is yes. Herein, lies the 
problem. When the board and the Board Chair cannot answer this 
question, under the consent orders with the Federal Government, 
that the board had a requirement to review these plans, I am 
asking you a very basic question. My hope was that I could get 
to my point here, and you won't even answer yes when it was 
clear that the board decision here, that there were material 
deficiencies from every one of your regulators in the 
submissions you had.
    So, let me move on. The Federal Reserve also rejected your 
submissions. I am not going to ask for a response. The answer 
is, yes. We will move on. And since you are a former Governor 
of the Federal Reserve, I think that is a particular concern.
    So what efforts did the board make to remedy the deficient 
submissions?
    Ms. Duke. We reviewed the submission. We discussed with the 
regulators what the deficiencies were. We had the management 
begin to work on resubmissions. We reviewed those 
resubmissions. The resubmission to the Federal Reserve was 
submitted. It came back with portions of the consent order 
being put into three buckets: generally acceptable; partially 
acceptable; and not acceptable.
    With respect to paragraph 2, the paragraph that covers the 
board's effectiveness, all of them were generally acceptable 
with the exception of three, which were partially acceptable. 
On paragraph 3, there were several that were partially 
acceptable, I believe one was generally acceptable, and two or 
three primarily around compliance and operational risk 
management were not acceptable and are currently under 
resubmission. The paragraph 2 resubmission was resubmitted, I 
believe, in early February.
    Mr. McHenry. Okay. So was there ever a sense of a question 
about the urgency of management to respond to the regulatory 
orders?
    Ms. Duke. There was never any question about the importance 
of the work in the company.
    Mr. McHenry. Was there a concern by the board about the 
speed with which management was responding to these orders?
    Ms. Duke. There was a great deal of concern by the board 
about the speed with which not only the orders were being 
responded to, but also the work to improve the risk management 
of the company and the quality of that work.
    Mr. McHenry. How do incomplete and late submissions reflect 
on the safety and soundness of your institution, of your former 
institution?
    Ms. Duke. They don't reflect well.
    Mr. McHenry. Okay. Wells entered into a $480 million 
settlement with shareholders in 2018, is that correct?
    Ms. Duke. That is correct.
    Mr. McHenry. Can you help us understand the basis for that 
settlement?
    Okay. Then, let me help you with that. The bank and the 
executives made misrepresentations and omissions about the 
bank's business model and sales practice.
    I have a lot of other questions here that I won't able to 
get to. I have deep concerns about just the responsiveness of 
the board. It is clear from the documents that the Majority and 
the Minority have the same findings of facts. There were severe 
deficiencies in management practices that were unique to Wells 
Fargo, and unique failures of this board of directors. That is 
why we are having this hearing, even though you have both 
resigned.
    So with that, thank you, Madam Chairwoman, for hosting this 
hearing, and I look forward to the questions.
    Chairwoman Waters. Thank you very much. The gentlewoman 
from New York, Ms. Velazquez, is recognized for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman, and Mr. Ranking 
Member. Ms. Duke and Mr. Quigley, yesterday I questioned Mr. 
Scharf about the Federal Reserve's 2018 consent order, and 
listening to your answers to the ranking member, I can't help 
but question the fact that you reviewed those plans that were 
materially deficient, but you concluded that they were 
acceptable, and then you sent them. Was this on purpose?
    Ms. Duke. Excuse me? I'm sorry?
    Ms. Velazquez. The fact that you sent acceptable but 
deficient materials, that plan that you sent to the Fed, did 
you do that on purpose?
    Ms. Duke. No, ma'am.
    Ms. Velazquez. No. Paragraph 2 of the consent decree 
requires Wells Fargo to submit a plan that enhances the board's 
effectiveness in carrying out its oversight and governance of 
the bank. Ms. Duke, until Sunday night you were both--you and 
Mr. Quigley--long-time board members of the bank. Don't you 
think submitting inadequate plans to the Fed shows the board's 
focus on profit, not on addressing the core operational risk 
management problems at the bank?
    Ms. Duke. I think the board and the company have been 
focused very intensively on the operational risk management of 
the bank. The requirements of the board--
    Ms. Velazquez. Then, explain how the Fed meeting minutes 
state that the Fed staff concluded you were primarily concerned 
with lifting the asset cap, even though you were unable to 
evaluate the degree of actual progress made by the bank on risk 
identification? Do you understand why this calls into question 
your commitment to the consent decrees requirement?
    Ms. Duke. My focus was on getting the work done to meet the 
requirements for operational risk management.
    Ms. Velazquez. After the Federal Reserve rejected Wells 
Fargo's April 2018 submission, Ted Craver, a director at Wells 
Fargo, sent you an email and questioned whether the plan, 
``missed the mark because Wells Fargo perhaps rushed the job in 
its zeal to clear this hurdle--meaning the asset cap--
quickly?''
    Given the comments in Mr. Craver's email, can you 
understand why regulators, legislators, and even consumers do 
not view the board's effort to comply with the consent decree 
to be genuine? Do you understand that?
    Ms. Duke. I do.
    Ms. Velazquez. And Mr. Quigley?
    Mr. Quigley. I also find that disappointing.
    Ms. Velazquez. Disappointing. And what actions have you 
taken to make sure that--
    Mr. Quigley. Paragraph 2 of the Fed consent order required 
significant changes in board effectiveness, and committee 
structures have been--
    Ms. Velazquez. Let me ask you, sir, what specific actions 
can you point to that you have taken to show that you are, in 
fact, committed?
    Mr. Quigley. We rewrote the charter for the audit 
committee, and we transferred the risk management oversight 
that was causing some confusion between the risk committee and 
the audit committee, and we moved those paragraphs to the audit 
committee charter.
    Ms. Velazquez. And are the regulators satisfied?
    Mr. Quigley. With respect to paragraph 2, which was related 
to board effectiveness, the Federal Reserve has said that we 
have been responsive there and we changed the committee 
structure--
    Ms. Velazquez. Thank you. Ms. Duke and Mr. Quigley, I think 
it is clear to me, to staff at the Federal Reserve, and even to 
other executives within Wells Fargo that the priority of the 
two of you and the overall focus of the board was on lifting 
the asset cap and exiting the consent decree, and not on 
actually fixing the risk management problems at the bank or 
holding senior management accountable. That is why you are 
here, and I will dare to say that probably you will have to 
come back if you do not change the culture in the institution.
    I yield back.
    Chairwoman Waters. The gentlewoman from Missouri, Mrs. 
Wagner, is recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman. Ms. Duke and Mr. 
Quigley, thank you for coming before the committee today to 
testify. Yesterday, we heard from Wells Fargo's new CEO, Mr. 
Scharf, about what steps he has taken in his first 
approximately 6 months to address the bank's deficiencies. 
While I remain cautiously optimistic that Mr. Scharf is the 
right person to move this business in the right direction, my 
questions today will be regarding your actions, and in some 
cases, lack thereof, to address the myriad of deep-seated 
issues within Wells Fargo.
    The committee's reports found that Wells Fargo routinely 
requests extensions to deadlines for submitting remediation and 
reform plans. Regulators typically grant those requests, but 
the bank's plans remain insufficient, even with the extra time.
    Ms. Duke or Mr. Quigley, do you see any differences between 
Mr. Sloan's and Mr. Scharf's handling of the consent orders? 
Meaning, I guess, is there a greater sense of urgency now with 
respect to regulatory compliance?
    Ms. Duke. First of all, I would like to say that the missed 
deadlines that the regulators talk about are completely 
unacceptable and I don't view those as acceptable. On the 
resubmissions and feedback on them, I guess because these are 
big, important pieces of work, I think about them similar to 
the first capital exercises that the Fed ran with Comprehensive 
Capital Analysis and Review (CCAR), as well as the submission 
of plans under the living will provisions, and those plans have 
gone through several iterations. There have been a number of 
banks, including Wells Fargo, whose original plans were not 
acceptable and they have had to improve them.
    Mrs. Wagner. Ms. Duke, was the board aware of the number of 
extensions that the bank requested in order to submit plans 
under the consent orders?
    Ms. Duke. The board was aware of any change in the plans 
for the consent orders themselves. I believe some of the 
comments about extensions had to do not just with the consent 
orders but with other work that was due to the agencies.
    Mrs. Wagner. Did that raise any kind of concerns for the 
board?
    Ms. Duke. It did. We spend, in our board meetings--they are 
now consumed with regulatory issues. So, we are now reporting 
not only to the board but to a number of committees as to the 
status of not just the consent orders, but matters requiring 
attention (MRAs), that are also the subject of regulatory--
    Mrs. Wagner. So, that was a red flag that the consent order 
program was not working?
    Ms. Duke. Let me give you this as an example. When Charlie 
came to the bank, and we were reviewing the agenda for the 
first board meeting he was going to attend--and we had long 
conversations with him about what we were doing--I said, 
``Charlie, I apologize. There are no agenda items about the 
business. They are all about the regulatory situation.'' And he 
said, ``I understand. That is where we are.''
    Mrs. Wagner. What about the fact that plans were repeatedly 
rejected? Knowing that, why didn't the board take more 
aggressive actions with respect to holding management 
accountable for the deficiencies of the consent order 
compliance program?
    Ms. Duke. There are a number of places where the people who 
were working on those submissions were changed. Someone else 
was working on them, in particular the ones that had to do with 
risk management. So, we got a new chief risk officer, we got a 
new chief compliance officer, we have been through four chief 
operational risk officers. We were changing out the people, 
looking for the people who could actually get the plans written 
in a complete fashion.
    Mrs. Wagner. Ms. Duke, the documents show you preferred the 
regulators to provide feedback directly to the heads of 
business lines. Help us understand why you did not want to hear 
from the regulators directly?
    Ms. Duke. I would very much like to address that piece of 
the report. I have been in a regulated industry for all of my 
career. I have been in a regulatory agency. I have enormous 
respect for supervisors, examiners, and the work that they do. 
And I have been in constant contact with the regulators at the 
OCC and at the Federal Reserve. The individual there, we did 
meet with him on numerous occasions. I found him difficult, I 
found him not knowledgeable about what was going on in Wells 
Fargo, and I found that he sent--he did send us letters on 
details that really belonged somewhere else. But I should never 
have said, ``Why are you sending this to me?'' I know better 
than to do that, and I apologize.
    Mrs. Wagner. Thank you for that admission. I yield back, 
Madam Chairwoman.
    Chairwoman Waters. Thank you. The gentleman from 
California, Mr. Sherman, who is also the Chair of our 
Subcommittee on Investor Protection, Entrepreneurship, and 
Capital Markets, is now recognized for 5 minutes.
    Mr. Sherman. The nation was shocked by the behavior of 
Wells Fargo. But what was equally shocking is that Wells Fargo 
seems uninterested in atoning for what it did. Was there any 
discussion at the board, Ms. Duke, of being on the right side 
of history and instructing your lobbyists to lobby in favor of 
the Overdraft Protection Act so that you could do something 
good for the consumers of the country, having ripped them off 
by the tens of millions? Yes or no, was there a discussion of 
supporting that Act?
    Ms. Duke. In the board meeting, we discussed overdraft 
programs, but we have not--
    Mr. Sherman. But you did not discuss what your lobbyists do 
in Washington, which affects not just your customers, which 
might include 1 in 10, or 1 in 20 Americans. You didn't even 
discuss the idea of being on the right side of history for all 
of the consumers. Did you discuss whether you should assert the 
rights under the arbitration provision so that the arbitration 
provision kept somebody out of court for the phony account, 
when they only signed it for the real account? Was that 
discussed in the board?
    Ms. Duke. We did not, or--
    Mr. Sherman. Well, it sounds like the board is terribly 
disinterested in atoning for the harm done to consumers, in 
general, in the country, or the particular consumers who were 
consumers of the bank.
    But let's shift from the outrages of the past to the crisis 
of the present. The stress test is designed to deal with what 
happens when you have a catastrophic event in the economy, 
because we know that every year there is a chance that such an 
event might occur. But once one event occurs, that does not 
diminish the likelihood of a second event occurring.
    So, we have had one, called the coronavirus. You could 
almost call it two, the decline in oil prices, which has shook 
up a bit of the economy. That means we could very well have a 
third that is no more likely, or less likely that something 
else that you did the stress test for would occur.
    Every dollar of dividends you pay or stock buybacks that 
you do makes the bank less able to deal with these 
catastrophes. You testified that America needs a strong Wells 
Fargo in today's economy. You put together, at the board level, 
back in July, a stock buyback and dividend program. Did that 
program anticipate what you would do if the country had one, 
call it one-and-a-half catastrophes that could affect the bank 
and the economy, and could very well have another one?
    Ms. Duke. I believe the design of those stress tests 
actually does that. Within the stress test, there are not only 
changes in the economy and economic variables, but also plugged 
into it are assumptions about different risk events.
    Mr. Sherman. You were still on the board when the 
coronavirus hit. You were there a couple of days ago. You 
believe a strong Wells Fargo is needed for our economy, that 
you have a national duty to provide a strong Wells Fargo. After 
the coronavirus broke, did you have discussions of ending or 
scaling back your stock buyback program?
    Ms. Duke. I have not attended a board meeting since then, 
but I spent a lot of--
    Mr. Sherman. Well, I would assume this being a national--
    Ms. Duke. I did speak with Charlie about the actions the 
company was taking internally.
    Mr. Sherman. How about the stock buyback program? Weakening 
the bank, endangering the nation, because you are too-big-to-
fail, in order to enrich the management by keeping the stock 
price up. No discussions of that since this epidemic arose?
    Ms. Duke. The design of the stress test on capital is to 
include the effects of unforeseen events.
    Mr. Sherman. But once you have one unforeseen event, then 
it is much more likely that you will end up with several--well, 
you plan for one or two or three. Once you have one, then the 
likelihood of four increases, because you already have one.
    Ms. Duke. Right.
    Mr. Sherman. And you are saying this coronavirus--you never 
thought about doing anything to diminish the payments to 
shareholders?
    Ms. Duke. I joined the Federal Reserve in August 2008. I am 
very much aware of the risk to banking. I know absolutely what 
it looks like when a run on a bank starts. I know once it 
starts, how difficult it is to--
    Mr. Sherman. So, we are just--
    Ms. Duke. I know how important capital is to the--
    Mr. Sherman. So, you know all these things--
    Ms. Duke. I know how important liquidity is.
    Mr. Sherman. When we have a change in circumstance, you 
would think we would have a change in policy, unless only the 
interests of management matter to the directors.
    I yield back.
    Chairwoman Waters. The gentleman's time has expired. The 
gentleman from Kentucky, Mr. Barr, is recognized for 5 minutes.
    Mr. Barr. Thank you, Madam Chairwoman. Ms. Duke and Mr. 
Quigley, I admit I am somewhat amused by my Democratic 
colleague's demand that you change the culture at Wells Fargo, 
otherwise you will have to come back to this committee. I am 
amused, because you both have resigned from the board as of 
last Sunday, and you are no longer in a position to make any 
changes at the bank. I think it is clear that the Majority 
wants only to embarrass you and to continue their persistent 
defamatory, anti-bank rhetoric.
    But since you are here, let's look to the past. Let's look 
to your service on the board in the past, which I think you can 
testify about.
    The Republican report provides evidence that you and your 
fellow board members understood the regulators' frustration 
with Mr. Sloan, yet he remained in place. And let me just read 
to you specifically from that report. The reports says, ``The 
evidence shows that Mr. Sloan and his team provided incomplete 
and exceedingly optimistic information to Congress, the public, 
and the board of directors. Wells Fargo was no closer to 
complying with the regulators' consent orders when Tim Sloan 
resigned in March 2019, than when his team took over in 2016.''
    What troubles me the most is that the report finds that 
between 2016 and 2019, the company routinely submitted 
incomplete plans to the regulators and missed deadlines. The 
submissions were frequently late or incomplete, or both.
    So my question is, why did Mr. Sloan remain as CEO for so 
long during that course of an incomplete compliance program?
    Mr. Quigley. I would just want to emphasize that our 
assessment of Mr. Sloan and his performance collected many, 
many data points from lots of places, and it wasn't reliant 
solely on representations that he might make. I acknowledge 
that he led as a glass-half-full type of leader, and he had a 
sense of optimism. I also had regular, and many times during 
the past year, daily communications with our regulators, and so 
I understood what their thinking was, and that helped me in my 
oversight of Tim and his performance as our CEO, and the HRC 
committee, because they were concerned about wanting to drive 
accountability deeper into the culture, revised our performance 
management system so that in order to qualify for a bonus, you 
had to have made significant progress on regulatory matters.
    Mr. Barr. Ms. Duke? Well, let me move on. Let me ask you 
this. The Republican report also shows very clearly that the 
regulators under the Obama Administration were asleep at the 
switch. Federal regulators identified issues related to Wells 
Fargo's sales practices as early as 2009. Unfortunately, it 
took an L.A. Times article to bring it to their attention years 
later, and even then, under Director Cordray and other 
regulators, they dragged their feet.
    In contrast, regulators under the Trump Administration have 
taken decisive action to correct the mistakes at the bank, 
including implementing an unprecedented asset cap and calling 
for sweeping changes to the bank's risk management.
    Ms. Duke, do you believe that the actions by the Trump 
Administration financial regulators, including the imposition 
of the asset cap, were appropriate and fair, given the gravity 
of the abuses and the need to send a message to management?
    Ms. Duke. I don't disagree with any of the actions of our 
regulators.
    Mr. Barr. I was encouraged yesterday to hear Mr. Scharf 
speak about the urgency and the focus on the consent orders and 
dealing with the consent orders. He testified yesterday that 
resolving the regulatory matters was his top priority. Do you 
feel that was the case under Mr. Sloan?
    Ms. Duke. I feel like resolving the issues that led to the 
consent orders, so resolving the weaknesses in operational and 
compliance risk management, were the priority across the 
company. But I do applaud and appreciate Mr. Scharf's emphasis 
on getting this work done. It is one of the reasons that we 
were so happy to hire him.
    Make no mistake, his job is not going to be easy, and I 
think he needs the full support of the board and needs to be 
able to put his full attention on doing that.
    Mr. Barr. Well, my time is expiring, but I was impressed by 
Mr. Scharf's testimony as well. And more than just his 
testimony, but also the fact that he is making these changes 
and bringing in outside leadership. There have been dramatic 
changes that have taken place there, and I wish him well.
    I yield back.
    Chairwoman Waters. The gentleman from New York, Mr. Meeks, 
who is also the Chair of our Subcommittee on Consumer 
Protection and Financial Institutions, is recognized for 5 
minutes.
    Mr. Meeks. Thank you, Madam Chairwoman.
    Let me ask both of you, Ms. Duke and Mr. Quigley, you have 
accountability, right? As Board Chair or on the board, there is 
accountability that you have?
    Mr. Quigley. Yes.
    Ms. Duke. Yes.
    Mr. Meeks. CEOs have accountability, correct?
    Mr. Quigley. Yes.
    Mr. Meeks. Okay. Mr. McHenry said that the responsibility 
is care, loyalty, and good faith. So the first question I would 
have is, is there any loyalty to your customers as board 
members? Was there loyalty there or just to the stockholders or 
the shareholders and those individuals who were employed by the 
company? Does any loyalty go to the customers?
    Mr. Quigley. Use of the terms, ``duty of care,'' ``duty of 
loyalty,'' and ``business judgment rule,'' all of that is 
grounded in Delaware law and relates to the Companies Act and 
the relationship between the board and the shareholders who 
elect us to represent them.
    Mr. Meeks. But I am asking you as a member of the board--
    Mr. Quigley. I absolutely have a sense of loyalty and a 
sensitivity related to all stakeholders that an enterprise--
    Mr.  Meeks. Okay. So, here is my question. Up until when 
you first were at the company, you were on the board. So I want 
to talk about those things that took place while you were on 
the board just to make sure. You were on the board, if I am not 
mistaken, in September of 2016. Is that correct?
    Mr. Quigley. That is correct.
    Mr. Meeks. Okay. So you were there when there was the fake 
account scandal. You were on the board, again, in 2016 when it 
came out that there was improper repossessing of 
servicemember's cars. You were on the board in December 2016 
when Wells Fargo failed its living will test. You were on the 
board and supposed to have some accountability in March 2017 
when there were more fake accounts. You were on the board again 
when Wells Fargo flunked the community lending test. You were 
on the board in April 2017 when the whistleblower won a $5.4 
million decision and got his job back.
    You were on the board in August 2017 for the lawsuit for 
overcharging small business retailers. You were on the board in 
February 2018 when the Federal Reserve restricted your size. 
You were on the board in February 2018 also when Sacramento 
sued Wells Fargo over discrimination against Black and Latino 
borrowers. You were on the board in March 2018 when the wealth 
management investigation emerged. You were on the board in 
April 2018 when there was a $1 billion settlement for mortgage 
locks and auto loan issues. You were on the board in May 2018, 
with altering business information without client knowledge. 
You were on the board in May 2018, with $480 million to settle 
a securities fraud lawsuit. You were on the board in June 2018, 
with the SEC fine for leading investors astray. You were on the 
board in July 2018, with refunds over ads like pet insurance 
and legal insurance. You were on the board in July 2018, with 
private bank wealth management issues.
    I could keep going on, but I am running out of time. I will 
probably run out of time before I talk about all of the things 
that took place at Wells Fargo when you were on the board and 
Chair of the Board and supposed to have some accountability. 
And doing all of this, my question then would be, in December 
2015, when the Fed came back, were there changes made to the 
composition of the Wells Fargo board in response to the Fed's 
concerns back then? You do not have to answer that, because I 
know. No, there was none, except for one board member who 
retired. The company nominated its entire 2015 board for 
reelection in 2016 when all this was going on. Did Wells Fargo 
change its CEO? Did the board change? I will answer for you: 
No. The chairman and CEO, John Stumpf, retired a year later in 
October 2016 in the wake of the sales fraud scandal, and only 
after he had offered unsatisfactory testimony before us. That 
might be why you resigned before you came to us.
    How about the chief risk officer? Did Wells Fargo find a 
new chief risk officer in response to the Fed's concerns about 
a weak risk culture at the company? I will answer for you 
again: No. Wells Fargo's then-chief risk officer Mike Loughlin 
continued to serve in that role through his retirement in mid-
2018, and claimed that the Corps should not donate to charity 
unless regulators acted more favorably towards Wells Fargo.
    In fact, in response to the Fed's concerns going back to 
2015, Wells Fargo's culture was the source of its risk 
management problems, and Wells Fargo made no changes. You made 
no changes.
    Chairwoman Waters. The gentleman from Missouri, Mr. 
Luetkemeyer, is recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman.
    I want to follow up a little bit on Congressman Barr's 
comments with regards to the Republican report and the 
information in there, and go back to where I think some of the 
problems started here from the fact of not being able to 
recognize it. It really concerns me from the standpoint that, 
you go back already to 2009 when it shows that the regulators 
indicated there was a problem with some of your employee sales 
tactics, and then in 2013 the Los Angeles Times ran a story 
leading to ethical breaches at Wells Fargo, and then in 2014, 
in December, they broke the story that eventually broke 
everything out.
    I think, Mr. Quigley, you were on the board for most of 
that period of time, and I think, Ms. Duke, you came on very 
shortly thereafter or right around that period of time, so what 
was your reaction to the news story at that point?
    Mr. Quigley. We were appalled by the claims in that story.
    Mr. Luetkemeyer. And what action did you take to find out 
other information or stop the practice?
    Mr. Quigley. The Risk Committee asked the leader of the 
community bank to come to the committee and explain what had 
been asserted.
    Mr. Luetkemeyer. Mr. Stumpf was in here during that period 
of time, and I asked him point-blank, because he was firing 
about 1,000 people a year over a 5-year period and kept it up. 
I kept asking him, ``Why have you not changed the culture in 
your bank? Because you keep firing people.'' He said, ``Well, 
now we are fixing it.'' I replied, ``No, you are not fixing it, 
if you keep firing 1,000 people every year. That is not fixing 
it. You should have fixed it so you do not have to fire 
everybody, so everybody is doing the right thing.''
    Did that not send up some red flags for you when he kept 
firing people and nothing changed?
    Mr. Quigley. The board was not aware of the pace of those 
terminations that you are referencing until the testimony that 
Mr. Stumpf gave in September of 2016, and we read the materials 
that he was going to be providing to this committee. That was 
the first time that the magnitude of those sales practice 
violations became known to the board, and the board then acted 
decisively. And that is when we commenced the special 
investigation to do the root cause analysis, and the incentive 
compensation plan in the community bank was then terminated, as 
was the leader of that bank.
    Mr. Luetkemeyer. Well, that is fine, but then according to 
our report here, it says the chief risk officer who joined 
Wells Fargo in 2018 showed that the company lacked the capacity 
to detect and fix problems compared to its competitors, which 
means you have a different business model, a different 
management style, which is fine as long as it works, but 
apparently it was not working.
    So was the board concerned--and according to our report 
here, it indicates that their concerns were dismissed by that 
individual. They were not believed. You believed your executive 
officer, Mr. Sloan, over the Risk Management Committee's 
report, apparently. Did that not strike you as kind of 
concerning, that the Risk Committee said, ``We need to be 
changing our management style,'' and yet, there was a conflict 
there? Did you take sides? Apparently, you did on this.
    Mr. Quigley. I'm sorry, but I sort of lost track--
    Mr. Luetkemeyer. Okay. My question is--
    Mr. Quigley. --of you moving forward, but the federated 
model--
    Mr. Luetkemeyer. You have a different management style than 
most banks your size, and there was concern about that style 
with regards to the risk officer that you hired in 2018, who 
apparently resigned in 2019. Did that not concern you at the 
time that there was a pointing out of this problem, and yet the 
executive officer seemed to say, we are okay, our management 
style is fine? So apparently, you took sides in this situation 
and chose your executive officer over your risk management team 
who said, ``We need to change the way we are going and what we 
are doing and how we are doing business here.'' Can you give me 
a rationale on why you did that?
    Mr. Quigley. There is no question that we had to build an 
independent risk management structure as we were transitioning 
from and trying to make part of our--what the old Wells Fargo 
was, that federated model. When the risk management sat inside 
that line of business, we did not have independent, effective 
risk management, and we did not have the right issues being 
escalated, and so I am pleased with the progress that was being 
made to build out that independent risk management group, and 
as the chairman of the Compliance Subcommittee of the Risk 
Committee, I worked very closely with our chief compliance 
officer and the significant, dramatic addition of resources and 
new capability that was coming to the bank to build that 
independent risk management function.
    Mr. Luetkemeyer. That answer leaves me wanting more, but my 
time has expired. Thank you. I will yield back.
    Chairwoman Waters. Thank you.
    The gentleman from Georgia, Mr. Scott, is recognized for 5 
minutes.
    Mr. Scott. Thank you, Madam Chairwoman.
    This has been an interesting and yet very disturbing 
hearing, and let me tell you why. Something is rotten in the 
cotton here. You all are not coming with the truth.
    Yesterday, we spoke with your chief executive officer. He 
had an excuse. He has only been around for 4 weeks. You brought 
him in. But you two have been on this board throughout the 
entire germination of this shameful attack on the trust and 
confidence of the American people in your bank.
    Now, first of all, while you were on the board, you allowed 
the bank's management to repeatedly submit material that was 
deficient in response to the consent order from our regulators. 
You did that. You did not hold your management accountable. If 
I was sitting on the board of directors and I was making 
$400,000, or $600,000, I would be much more plain, for what? 
You mean the Federal Reserve is coming in and laying the 
blame--they did--directly at the feet of the board, saying you 
are not holding management responsible. Who came up with this 
idea to make up accounts, make them up, false accounts? Not 
just for one or two people, but for millions. And you all sat 
on that board, and you said nothing, you did nothing?
    We have to find the answer from you today. Why did you 
allow this rabid conflict with the American people's trust in 
our banking system to permeate while you were sitting there all 
those years? Whose idea was it to place this on the backs of 
your employees to make up these accounts? Somebody had to do 
it. Your chief executive from yesterday cannot be held 
responsible for that, but you two can. Who came up with the 
idea to do this? Tell us right now. Tell us. Somebody had to. 
You were sitting on the board when they were coming up with 
this. And you all did not hold your management responsible? 
What a sorry excuse for a board, that you said nothing about 
this. That is what is amazing about this appearance. Why? Who 
made that decision to say, ``Let it go on?'' And why did you do 
it and say nothing? Answer that for me.
    Why didn't you hold your management responsible? And why 
did you allow them to give these unacceptable reports to our 
banking regulators? Why? Whose idea was it? Come on, tell us. 
Come closer. Tell us. Who made that decision to make up these 
accounts falsely? Who? Tell us.
    Therein, lies the problem, and I hope and I pray that the 
people of this country see your stone silence when you will not 
even answer this question, when you will not even respond to 
the regulators. This is an unpardonable sin that Wells Fargo 
has committed upon the American people.
    Chairwoman Waters. Thank you.
    The gentleman from Colorado, Mr. Tipton, is recognized for 
5 minutes.
    Mr. Tipton. Thank you, Madam Chairwoman, and I appreciate 
both of you coming here as private citizens, now voluntarily 
coming in to address this committee.
    I have a number of critiques, and I believe you probably 
understand that many are valid. But I think a lot of our job 
needs to be looking forward as well in terms of as a 
legislative body, what rules and regulations ought to be 
applied? Were regulators asleep at the switch in terms of 
actually enforcing with Wells Fargo, and some of the board 
compliance as well?
    One of the issues that we have had a lot of conversation on 
in our committee is in regards to the Community Reinvestment 
Act (CRA). In March of 2017, Wells Fargo received a rating of, 
``needs to improve.'' And a press release that came out of the 
bank dated in March 2017 stated that the performance aspects of 
the CRA exam included lending tests, the investment test, and 
the service test. Wells Fargo earned an ``outstanding'' or 
``highly satisfactory'' rating. Ultimately, the ``needs to 
improve'' CRA rating came, according to the OCC, from the non-
CRA performance factors.
    Ms. Duke, you were privy to the circumstances of this 
rating downgrade in your capacity on the board. Is that 
accurate?
    Ms. Duke. Yes, sir, it is. Under those tests, the company 
received higher scores, but as a result of the issues, not only 
sales practices but with some other issues, the OCC elected to 
double-downgrade the--
    Mr. Tipton. Okay. What was your reaction to that rating 
downgrade?
    Ms. Duke. I understood the reason for it. We did appeal 
that rating, and the reason for that is this: I think the CRA 
is a really, really important law and a really important part 
of our banking system. When I was a regulator, I actually did 
hearings around the country about changes to the CRA. And I 
think it is important that the CRA be used for the purposes for 
which it was intended. And while I recognize and do not condone 
at all the behavior that led to the double-downgrade, I 
question the use of that as a tool to deal with the other 
problems of the company.
    Mr. Tipton. As a former regulator, you have had a lot of 
different capacity. Do you think it is important, with CRA 
ratings as an example, that they are less subjective and more 
objective in terms of some of the performance?
    Ms. Duke. I no longer make the rules on CRA, so I think my 
opinion is not--
    Mr. Tipton. Well, as a former regulator, I was just 
curious.
    Ms. Duke. I think CRA is really important, and we need to 
find ways to measure it, but we also need to find ways to 
measure and know what the needs of communities are and 
individual communities, be they urban or rural. And I think the 
banks have a really important responsibility to meet those 
needs, especially in low- to moderate-income areas.
    Mr. Tipton. Wells is a big bank. I have a lot of small 
community banks that are within my district as well. In 
general, what options are available to a bank that 
fundamentally disagrees with a decision that is handed down 
from a regulator?
    Ms. Duke. There is an appeal process, but at least in our 
case, that appeal was denied. And I would say that the issues 
at small banks--because I was a community banker for almost all 
of my career--is it is much harder in a community bank to be 
able to find the investments that do meet the requirements of 
the CRA and to have as complete a picture. So I think, paying 
attention to the resources and the ability of the different 
institutions, I have seen cases where community banks got 
together, pooled their funds, and did really good things in 
their community together rather than individually.
    Mr. Tipton. You have dealt with small banks and big banks. 
You peel back to the very regulators that make a determination, 
with no real chance to be able to turn it over. It occurs to me 
that there ought to be some independent measures to be able to 
have some of that actually addressed.
    You both have been hit a lot here today in terms of board 
performance. You probably have reflected back just a little bit 
in terms of how the boards ought to be able to react to 
management decisions and hiring. Do you have some thoughts that 
maybe when we are looking at legislation, now reflecting back, 
where things could be done better?
    Mr. Quigley. I think there is no question about the 
fundamental approach to corporate governance and having the 
opportunity to be able to play that hand and do what you need 
to do in the best interest of your shareholders. Now in the 
world, as we think much more broadly than just shareholders, as 
Charlie pointed out yesterday, thinking about all of those 
stakeholders, we absolutely were appalled by the sales 
practices abuses. And as soon as we were aware, we took 
immediate action.
    Chairwoman Waters. The witnesses have requested a brief 
break, so the committee will stand in recess for 5 minutes. 
Thank you.
    [brief recess]
    Chairwoman Waters. The committee will come to order.
    The gentleman from Texas, Mr. Green, who is also the Chair 
of our Subcommittee on Oversight and Investigations, is 
recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman.
    Madam Chairwoman, as a practitioner, I once represented a 
recipient of welfare who was charged with a crime because she 
made more money at a job and received some benefits from the 
Federal Government. She had to be prosecuted. A crime was 
alleged.
    If this bank was much smaller, had maybe ten employees who 
were engaging in this type of activity--opening up fraudulent 
accounts, creating fraudulent credit cards--someone would be 
prosecuted. A small bank would have had prosecutions take place 
within the ranks of the person within the bank. Evidence shows 
that small banks have had persons prosecuted.
    But Wells Fargo created 1.5 million fraudulent accounts. 
Wells Fargo had over 500,000 credit cards created fraudulently. 
Is it the case that if you become so big and you create such a 
grand scheme, that you are beyond the law? The law ought to 
apply to Wells Fargo just as it applied to that welfare 
recipient, just as it would apply to any small bank in this 
country. Wells Fargo cannot be too-big-to-prosecute. It cannot 
be too-big-to-jail. Wells Fargo has to be held accountable. We 
cannot allow $17,296,835,949 in penalties to become simply the 
cost of doing business.
    While these criminal activities were taking place, you were 
making billions. And you sat on the board, and you knew what 
was happening, and this morning you as much as acknowledged 
fraud when Chairwoman Waters asked about the accounts. Did 
anybody ever think to say, somebody ought to go to jail, 
somebody has to be prosecuted, this is a crime? There were 1.5 
million fraudulent accounts. It is unbelievable. It is 
unimaginable. Yet, no one has been prosecuted.
    Maybe, I am mistaken. If someone at Wells Fargo has been 
prosecuted for these egregious offenses, would you kindly 
extend a hand into the air, either of the two of you or both?
    Let the record reflect that no hand has been extended into 
the air. I shall have a photograph of this in my office, and it 
will have under it: ``Ask me about this picture.'' And it will 
show you with no hand raised, and I will explain this to 
people. You cannot escape the long arm of the law. It applies 
to all.
    If you believe that this board could have done more to 
bring to justice those who perpetrated these criminal 
activities, raise your hand, please.
    Let the record reflect that the board members have 
concluded that the board could not have done more, because no 
hand was raised. I shall have a photograph of this in my 
office, along with other photographs, I might add, that I have 
collected from persons who have been similarly situated.
    We are now at a point in our history where we have to 
rethink the Wells Fargo paradigm. I concur with those who are 
saying we have to rethink whether or not Wells Fargo is not 
only too-big-to-fail, but we corrected that, but also too-big-
to-exist. Maybe, you are too-big-to-manage. Maybe, the solution 
is going to have to be something that emanates here because you 
are not being prosecuted. At some point, the long arm of the 
law has to reach Wells Fargo.
    I yield back the balance of my time.
    Chairwoman Waters. The gentleman from Texas, Mr. Williams, 
is recognized for 5 minutes.
    Mr. Williams. Thank you, Madam Chairwoman. Thank you both 
for coming here today. Yesterday, we heard from the new CEO, 
Charles Scharf, who said that Wells Fargo still has a lot of 
work to do before the structural problems that allowed these 
scandals to go unnoticed for so long are fixed.
    The previous CEO, Tim Sloan, seemed to only care about 
getting the asset cap lifted by the Fed to expand businesses 
without fixing the underlying problems that caused customers to 
be harmed in the first place.
    As board members, I am disappointed that you were not more 
active in your positions to get Wells Fargo back to the strong 
presence that they have historically been in this country. 
Reports uncovered that the board was well aware of the 
regulators' concerns over Mr. Sloan's poor performance and 
misleading public comments about the company's progress, and 
yet he was still able to keep his position as CEO.
    As a small business owner myself for 50 years--I am a car 
dealer in Texas--I know how important the attitude at the top 
levels of leadership is to my employees. The CEO sets the tone, 
and if they are not taking the past problems seriously, then it 
is hard to get other employees to change their behavior as 
well.
    Ms. Duke, quickly, why did you stick with Tim Sloan for so 
long?
    Ms. Duke. I am going to answer your question, but if I 
could just respond?
    Mr. Williams. No, ma'am. I have the time here. Please 
answer my question.
    Ms. Duke. Okay. We made Tim Sloan the CEO when we replaced 
John Stumpf. Tim Sloan immediately stopped the sales practices 
and incentives, and replaced most of the management in the 
community banks. He took action quickly. We had problems that 
needed to be addressed immediately. The time it takes to find 
someone, an external search, and as a number of you noticed, 
the question of whether or not anyone with the ability to fit 
into this role, would be willing to come into that role, a 
question of--
    Mr. Williams. I understand. The committee reports uncovered 
that there were a lot of third-party consultants brought in to 
work with regulators once the scandal broke. It makes sense to 
bring outside experts in, in order to make the necessary short-
term adjustments to protect consumers.
    However, it also does not seem like there was a large push 
internally to hire individuals to deal with the non-financial 
risk in the long term.
    So, Mr. Quigley, did you have any concerns that Wells Fargo 
could not do this work internally? Or why wasn't it a priority 
even after the regulators voiced their concerns?
    Mr. Quigley. I definitely had concerns, and I was unhappy 
with the pace that was occurring. With respect to the use of 
third parties, as the former CEO of a large professional 
services firm, I know that sometimes when you want to 
accelerate progress, you will look to a third party to try to 
accelerate the activity that needs to be done. But we needed to 
build capability, and we needed to recruit capability, and we 
needed to build capacity into that independent risk management 
group. And one thing that I know is true is that to find the 
most able resource takes much more time than finding the most 
available resource.
    I am not happy with the time that has been required, but I 
am pleased that progress is now being made, and I agree with 
the points that Mr. Scharf made yesterday with respect to the 
real urgent nature of the action that needs to be taken and his 
absolute focus on regulatory.
    Mr. Williams. Good. As we mentioned earlier, the regulators 
took the highly unusual step of making a public statement that 
Tim Sloan was being overly optimistic in his comments about the 
progress of Wells Fargo in becoming compliant with various 
consent orders. So, Mr. Quigley, in your testimony, you state 
that once the board was made aware that they were not receiving 
quality information, decisive actions were taken to fix the 
issue.
    So my question is, quickly, what structural changes were 
made internally to ensure that the board will receive complete 
and accurate information moving forward?
    Mr. Quigley. We have a very active communication between 
committee Chairs and their liaison officer who is bringing 
information. We review those agendas and challenge the quality 
of the data that is coming our direction.
    I was pleased with the elimination of the federated model. 
I was pleased with the need to strengthen the independent risk 
management group, and with that came higher-quality information 
to the board to enable stronger and more effective oversight.
    Mr. Williams. Okay. In closing, let me just say this: I 
hope that this institution eliminates the, ``I do not know'' 
attitude. We have heard that from so many people; ``I do not 
know.'' It is unbelievable. I have 200 employees, and I think I 
know. And that, ``I do not know'' attitude has really run 
rampant, and I hope that your leadership level will stop that. 
And I still cannot believe how much money they pay as a board 
of directors.
    Chairwoman Waters. Me either, Mr. Williams.
    The gentleman from Missouri, Mr. Cleaver, who is also the 
Chair of our Subcommittee on National Security, International 
Development and Monetary Policy, is recognized for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Let me, first of all, express some appreciation and some 
surprise. You were not subpoenaed, you came here of your own 
volition, so thank you for coming. Some of us were doubting 
seriously whether or not you would come, so I appreciate you 
coming.
    Let me try to get some information from you. I am gravely 
concerned about the report we received, the Committee report we 
received. Are either of you aware of an informal, unofficial 
secret back channel to the CFPB, to the regulators at the CFPB?
    Mr. Quigley. I am not aware of that, and I do not believe 
it occurred. I do not know what was referenced--I did read the 
Committee report, and I was the one who had quarterly meetings 
with Mr. Blankenstein. And when I would meet with him, there 
were always members of the CFPB there with him, and I was 
always accompanied by people from Wells Fargo.
    Mr. Cleaver. Thank you. So, you are saying that people got 
something wrong or made it up or--
    Mr. Quigley. I understood your question was, was I aware of 
any back channel communication to the CFPB, and I am saying no, 
I was not.
    Mr. Cleaver. I know, but that also means they put it in the 
report, so somebody did something incorrectly or falsely, maybe 
even with intentionality. But you just really got my attention 
when you said you met with Mr. Blankenstein. Did you detect any 
kind of racial attitudes when you were meeting with him?
    Mr. Quigley. I did not. He came to our board of directors 
and spoke on behalf of the CFPB, and following his report to 
the board, I then reached out to try to meet with him if he had 
time when I was in Washington. And again, in those meetings, I 
was always accompanied by someone from Wells Fargo, and he was 
always accompanied by others from the CFPB. I never had a one-
on-one with him.
    Mr. Cleaver. Well, I am only interested in that because of 
the fact that we know he used an ``N'' word, because it was in 
his text message--his email. You are not aware of that?
    Mr. Quigley. I read what was in the report, but I had never 
seen that before.
    Mr. Cleaver. It is right there now.
    Mr. Quigley. Oh, this was the note that Alan sent to me 
just summarizing the discussion that he had had with Mr. 
Blankenstein, and then at the time that he was departing. And I 
did not follow up. I did not ever have any further 
communication with him.
    Mr. Cleaver. But when you saw that, were you alarmed?
    Mr. Quigley. Well--
    Mr. Cleaver. If you have to think about it, you were not. 
There has been an allegation about the back channel, which you 
say was not there. And so, I will change that. It is so 
offensive to me as a human being to be referred to with the 
nastiest name that somebody could call somebody of my color.
    So, let us move on. Who appoints the Compensation 
Committee? I mean, you guys are gone. I am trying to find out, 
get information on who appoints the Compensation Committee?
    Ms. Duke. All of the committees are appointed by the 
Governance and Nominating Committee.
    Mr. Cleaver. Is that like the desirable committee on the 
bank board?
    Ms. Duke. I do not think it is necessarily the desirable 
committee. We look for people on that committee who have had 
responsibility in their careers for human resources. We also 
look to make sure that that committee is diverse because they 
deal with so many issues related to our management and 
employees.
    Mr. Cleaver. A lot of people want to be on the 
Appropriations Committee here in Congress. Mr. Quigley, do 
you--
    Mr. Quigley. I'm sorry. I did not understand the question.
    Mr. Cleaver. The same question, the Compensation Committee, 
are people like pushing and shoving to get on it?
    Mr. Quigley. There was a time--and as an auditor, I am a 
little sensitive to this, but there was a time when everybody 
wanted to avoid the Audit Committee because they felt that was 
just simply a place not to be. But I believe the aggressive 
approach--
    Chairwoman Waters. Finish your statement.
    Mr. Quigley. The aggressive approach with respect to the 
Human Resources Committee and the Compensation Committee, that 
has become a difficult seat on any board, and I do not see 
people elbowing and fighting and trying to have that privilege. 
That is a very heavy lift.
    Mr. Cleaver. Thank you. Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you.
    The gentleman from Ohio, Mr. Davidson, is recognized for 5 
minutes.
    Mr. Davidson. I thank the chairwoman.
    Ms. Duke, Mr. Quigley, in your view, now that you are no 
longer with the board, do you believe that some of the criminal 
actions taken by employees at Wells Fargo should be prosecuted 
by Federal officials? Or do you believe that the fines that 
have already been implemented provide enough redress for 
consumers?
    Ms. Duke. I appreciate the ability to answer that. I wanted 
to respond to it twice before. When we did our investigation of 
what happened in sales practices, we delivered all of the 
evidence that we found to the SEC and the DOJ, both civil and 
criminal, and--
    Mr. Davidson. The plea agreements highlighted that you paid 
fines, settlements as a corporation, and you acknowledged that 
crimes were committed.
    Ms. Duke. That is correct. We do not have the ability to 
prosecute, but what we did do with the individuals that we 
found to be culpable was to claw back, forfeit, not pay 
compensation, to terminate for cause, and we fined individuals 
through those mechanisms $180 million or so, and, in 
particular, with Carrie Tolstedt and John Stumpf, we took 
significant amounts of monies, 60-some million dollars each, I 
think.
    Mr. Davidson. Should the Federal Government prosecute them 
for committing Federal crimes?
    Ms. Duke. That is a decision for the prosecutors, but there 
is--we have in no way impeded their ability to do so.
    Mr. Davidson. Mr. Quigley?
    Mr. Quigley. We have provided all of the information that 
we learned through the investigation to those bodies--
    Mr. Davidson. I understand. Should they be prosecuted? They 
committed crimes. Should they be prosecuted?
    Mr. Quigley. I am not in a position--
    Mr. Davidson. You do not have an opinion on the matter? You 
vote, ``present?''
    Ms. Duke. I would say, yes.
    Mr. Davidson. On the buttons you get, ``yes,'' ``no,'' or 
``present.'' So, you both say, ``present?'' It is not an essay. 
``Yes,'' ``no,'' or ``present,'' should they be prosecuted? You 
acknowledged that someone--
    Ms. Duke. I think, yes.
    Mr. Davidson. It was not the ATMs. It was not the 
conference rooms that committed crimes. Someone who worked for 
Wells Fargo committed crimes.
    Mr. Quigley. Your point is acknowledged.
    Mr. Davidson. Should they be prosecuted?
    Mr. Quigley. Your point is acknowledged.
    Mr. Davidson. ``Present.'' Pathetic. I do not know what 
else to say. I am glad you are not on the board there, frankly. 
Presumably, by getting hired for such a board, you had an 
exceptional amount of experience and you were well-qualified or 
considered so by someone who offered you the position and a 
generous compensation package for being board members.
    How was the culture at Wells Fargo different than the 
presumably positive cultures that you were part of before? Or 
is this really just endemic in all of the places? Should we 
look at every one in this industry the same way that the world 
is looking at Wells Fargo?
    Mr. Quigley. At Wells Fargo, we have said very statedly and 
very clearly that a culture change is needed. I am pleased with 
the progress that is being made. These are early days for 
Charlie, but his commitment to change culture, as I stated in 
my opening statement--I am pleased that that is one of his top 
priorities.
    Mr. Davidson. Well, better late than never, right? I do 
think that Mr. Scharf has a lot of potential. I like his resume 
and background and, frankly, it is not my job to hire the board 
members or the CEOs of any corporation now that I no longer own 
shares or control shares of a privately held company like I 
once did. But I do know that culture matters, so unless he is 
empowered to change a ship of 270,000 employees, that culture 
is not going to change overnight.
    Now, as the Federal Government, having seen very little 
action by the Executive Branch, with a duty to take action 
where Federal crimes have been committed, I think it is right 
that the Legislative Branch is calling attention to that, not 
just with the failures with this particular bank, but with the 
failures within the Department of Justice to prosecute people. 
Yes, there is prosecutorial discretion, but the idea is that 
everyday Americans feel like there is one standard for them and 
a different standard for the well-connected, well-to-do people 
who operate companies like Wells Fargo or, frankly, work at the 
FBI, the Director of National Intelligence, the CIA, or any 
other part of the Executive Branch. And we cannot have people 
going around saying, ``Lock her up,'' ``Lock him up,'' all day 
because the Department of Justice continually fails to apply 
one standard of law and have Lady Justice blindfolded. There 
has to be accountability and, frankly, when crimes are 
committed, particularly in cases like this, six-plus billion 
dollars in fines and an acknowledgment that the crimes were 
committed, someone should go to jail. We need our Department of 
Justice to provide that accountability, and we need board 
members who are going to do their duty.
    So, I look forward to the progress made under new CEO 
Scharf, and I hope that we never need to see Wells Fargo here 
again except to commend them for the positive change in culture 
that has been accomplished. And I yield back.
    Chairwoman Waters. The gentleman from Colorado, Mr. 
Perlmutter, is recognized for 5 minutes.
    Mr. Perlmutter. Well, I guess I am going to sound like a 
board apologist compared to everybody else here, because I look 
at the role of the board a little differently than the others. 
But I am a customer of the bank and have been a customer of the 
bank for 40 years, and I am a customer who went from two 
accounts to eight accounts, had a line of credit that I got 
when I just got out of law school, cut in half but given a 
credit card for twice that amount with a big line of credit 
attached. Things I never asked for just sort of appeared. So, I 
know the abuses that occurred.
    My problem here is there has been a lot of time that has 
passed, obviously. The report details all of that. The board, 
in some instances, appears to have taken really some serious 
action with Mr. Stumpf, and with Mr. Sloan, trying to deal with 
the consent decrees, but time just kept passing.
    So my questions to you two, and you can answer them as you 
choose--I think there are sort of three choices for me sitting 
up here. Either you were derelict in your duties and did not 
address these consent orders, or the culture of the bank needs 
to be changed pretty dramatically in terms of its personnel and 
operations, or the thing is just too big, and for any board or 
anybody, any manager, to get their arms around it cannot be 
done.
    So, Ms. Duke, if you could respond to my concerns?
    Ms. Duke. What we have found is that some of the issues are 
directly attributable to individuals, but a number of the 
issues are attributable to the structure of the way the company 
is managed, the decentralized structure, and that has required 
that we centralize and also standardize and simplify the way 
all of our employees do their work. We need to be much clearer 
about that. What that looks like is, for example, if you take 
83 different human resource departments and put them together, 
you do not get one fully functioning human resource department. 
It takes quite a bit of time to build the capabilities of a 
central human resources department to work with 265,000 
employees.
    Mr. Perlmutter. That leads me to some other questions for 
you, but, Mr. Quigley, your response?
    Mr. Quigley. If I could just comment on the multiple choice 
that you offered, I would choose culture change, and that is 
what you heard from our CEO yesterday. He is driving to build a 
culture of operational excellence and integrity as a number-one 
priority. I am pleased that that is what he said to the entire 
team on day one, and he has not varied from that message. He 
continues with execution, execution, execution, and we need to 
get to that point.
    Mr. Perlmutter. Well, let me challenge you both on that, 
then, because--I do not know how many customers--70 million 
customers, me being one of them, 275,000 employees, 83 
personnel departments, at least 5 years from the first consent 
order to try to remodel or revamp the culture, and yet that has 
not taken place, it is still ongoing, and with a lot of things 
unanswered. It is getting to me that this thing is just too 
big. And that is not the answer I was thinking I would get to, 
but that is where it is going. Ms. Duke?
    Ms. Duke. I do not think the problems are a function of 
size. I think they are a function of the way the company is 
organized and the way it has been organized historically.
    Mr. Perlmutter. But now, we have gone 5 years. How long is 
it going to take to restructure or reorganize? I was a 
bankruptcy lawyer for a long time, and did a lot of 
reorganizations. How long do you think it is going to take to 
reorganize this company, now that you can look in the rearview 
mirror.
    Mr. Quigley. We have a new CEO that you heard from 
yesterday, and you saw that he is moving with a sense of 
urgency. He has a new Operating Committee. He is rebuilding the 
culture. This is his number-one priority, and he filled the 
seat of chief operating officer who has made regulatory 
progress. That individual's number one priority--
    Mr. Perlmutter. So you do not think that the last two CEOs 
were capable of doing that? You are saying this is different?
    Mr. Quigley. I believe having a CEO from the outside is 
absolutely different. There was a question earlier about, what 
are the differences between Mr. Sloan and Mr. Scharf, and there 
is no question that this is different under Charlie. I have 
been on the board for 6 years, and I am now working with my 
fourth CEO. The board was not derelict in its duties, but very 
much actively at the table and trying to drive change in a way 
that could be sustainable and to make sure that customer harm 
never occurs. That is absolutely what I wanted and what the 
ambition was.
    Mr. Perlmutter. Thank you. I yield back.
    Mr. Green. Madam Chairwoman, I ask unanimous consent to 
insert the following items into the record: ``Thirty-five 
bankers were sent to prison for financial crisis,'' CNN 
business article; ``Wells Fargo to pay $3 billion over fake 
account scandal,'' NBC News article; and a Good Jobs article 
that tracks the amount of penalties that Wells Fargo has paid 
since 2000.
    Chairwoman Waters. Without objection, it is so ordered.
    The gentleman from Tennessee, Mr. Kustoff, is recognized 
for 5 minutes.
    Mr. Kustoff. Thank you, Madam Chairwoman, and thank you, 
Ms. Duke and Mr. Quigley, for appearing today.
    Ms. Duke, in your remarks I heard you talk about how you 
came up through the ranks as a teller to customer service 
representative. I did the same job back when I was younger. My 
question is, in my district, Wells Fargo does have a retail 
presence. If you were on the front lines today as a customer 
service representative, and you had one of your Main Street 
customers come into the bank, an hourly employee, a small-
business person, what have you, why would you tell them that 
they need to continue banking with Wells Fargo after the years 
of misdeeds?
    Ms. Duke. Thank you for that question, and I would like to 
talk a little bit about the front-line employees at Wells 
Fargo, because the front-line employees at Wells Fargo were not 
the reason for the sales practices issues. It was the way they 
were managed, and there are hundreds of thousands of those 
employees who come to work every day who have served their 
customers for 40 years. Many of you have been their customers 
for 40 years, and the bond between those employees and their 
customers and the service that they are committed to and the 
importance of the bank to those customers has been something 
that to me, with all of the ugliness that I have seen, is the 
reason I joined the board of Wells Fargo. And I have employees 
who work there. Their jobs have been much, much harder during 
the time that we have created damage to their reputations and 
to their company's reputation, yet they continue to love this 
company and want to do everything they possibly can to make 
this company succeed. And their customers are pulling for them 
as well.
    Mr. Kustoff. Well, let me reclaim my time, and ask it a 
different way. Wells Fargo has put those front-line employees 
in the position of having to defend actions that you have just 
stated they are not responsible for. What do those front-line 
employees tell their Main Street customers about why they 
should continue banking at Wells Fargo?
    Ms. Duke. They tell them about the service that they offer. 
They pay attention to the customers' needs. They look at the 
customers' needs. They look at the products that we have that 
meet those customers' needs. We are still the largest small-
business lender in the country. We are the largest lender in 
low- to moderate-income areas. We are the largest mortgage 
lender. We are the largest agricultural lender. Wells Fargo is 
still really important in communities and to our customers, and 
they talk about how important they are there.
    Mr. Kustoff. Mr. Quigley, would you agree that the Wells 
Fargo brand and reputation is damaged?
    Mr. Quigley. Unarguable.
    Mr. Kustoff. Do you believe it is irreparably damaged?
    Mr. Quigley. I believe it can be recovered, and the plans 
that Charlie reported yesterday, looking again at the future of 
Wells Fargo, were optimistic. We need and want a strong Wells 
Fargo.
    Mr. Kustoff. Yesterday, and some today, we have talked 
about sales incentives that were provided to employees back 
under Mr. Sloan and what they are today. How do you compare 
those sales incentives for those employees today versus those 
under Mr. Sloan?
    Mr. Quigley. The sales incentives were terminated as soon 
as the board was informed, and we understood it was part of the 
root cause of how this abusive behavior occurred. I am 
delighted that is a part of the past, and the new structure 
focuses on customer experience and how the individual who comes 
into the branch that you are asking about, what is their 
experience? And how do they benefit from being there?
    Mr. Kustoff. The two of you are no longer on the board, but 
I am going to ask you to speak for those members who are 
currently on the board. I will start with you first, Ms. Duke. 
Do you believe that all current members of the board have the 
right attitude for a new culture at Wells Fargo?
    Ms. Duke. I absolutely do. Many of them were recruited 
knowing what happened at Wells Fargo and being committed to 
making the changes necessary so that it would not happen again.
    Mr. Kustoff. And, Mr. Quigley?
    Mr. Quigley. The same. I am confident in my former 
colleagues and their commitment to do what is right.
    Mr. Kustoff. Thank you, and I yield back the remainder of 
my time.
    Chairwoman Waters. Thank you. The gentlewoman from Ohio, 
Mrs. Beatty, who is also the Chair of our Subcommittee on 
Diversity and Inclusion, is recognized for 5 minutes.
    Mrs. Beatty. Thank you, Madam Chairwoman, and I thank the 
witnesses. I have been sitting here for this whole hearing, 
trying to digest the questions and your responses, and quite 
frankly, I am trying to figure out what you thought your roles 
were as trustees and what you got paid for, with so many of 
these widespread consumer abuses, the regulatory findings, and 
certainly the lack of effective corporate governance.
    Let me start with you, Ms. Duke. You took great pains in 
writing about your background in your testimony, more than I 
have ever seen in any other testimony. You reminded us that you 
started out as a part-time teller at a drive-through bank. You 
transitioned as a new account clerk. You took great pains to 
tell us that you were the second-lowest paid employee, and how 
you sat across from customers and how you put them first, how 
you worked your way up, how you became the first woman to Chair 
the American Bankers Association, the Board of Governance, and 
how much you understood and knew about regulatory practices, 
that you were just stellar in this.
    Yet, you act like you are one of us. In your testimony, you 
also then say you were as appalled as the Members of Congress 
with all of these findings, and you didn't know how it 
happened. Well, that is appalling to me.
    And then I noticed that you then are the one who also 
agreed to Mr. Sloan's payment. The board decided that Mr. Sloan 
was worth more than $18 million in compensation, including a $2 
million bonus.
    Despite all of this, Ms. Duke, you also drafted a proxy 
statement that you released to the investors, stating, ``The 
board decided to award Tim a cash bonus for 2018 as recognition 
for his substantial progress in changing the culture and 
business practices of Wells Fargo, and building out a strong 
management team to focus on the remaining work to strengthen 
the compliance and operational risk.''
    Now with everything you knew, being paid, being 
responsible, and having this background, and then we hear what 
they did, the abuses to consumers, tell me why you drafted this 
statement, and did you really believe this, or did someone make 
you do this, or were you paid extra to do this?
    Ms. Duke. Congresswoman, I joined the board of Wells Fargo 
because of the company I thought that it was.
    Mrs. Beatty. No, no, no. That is not my question. Tell me 
why you wrote this statement about him, after all these things, 
and you were there, that happened before, when you wrote this 
statement in 2018.
    Ms. Duke. We did not find out that Mr. Sloan had any 
responsibility in sales practices. He became the CEO in 2016. 
We paid him no bonus for 2016--
    Mrs. Beatty. No. I am talking about your statement in 2018. 
A lot happened, as we heard Congressman Meeks read off all of 
the things that happened on your watch, and Mr. Quigley's. And 
you can jump in, Mr. Quigley, if you want to respond, since you 
were also there, and certainly read and witnessed when she 
wrote this to the shareholders. Did you have any response? Did 
you feel this was misleading the shareholders at Wells Fargo?
    Mr. Quigley. There is no question that I read the proxy, 
and there is also no question that--
    Mrs. Beatty. Do you agree with it? Yes or no?
    Mr. Quigley. Yes.
    Mrs. Beatty. Because it is my time, and I have a question 
for you.
    Mr. Quigley. Yes.
    Mrs. Beatty. So you all think, despite now saying it is 
appalling, all that you have heard that has happened, even in 
2018--you know what? This makes me feel that you are as 
irresponsible as he was in all of the things, and it is 
criminal that you are even sitting here.
    Mr. Quigley, let me follow up on Congressman Cleaver's line 
of questioning regarding a back-channel relationship between 
Wells Fargo and the CFPB, specifically a political appointee of 
the Trump Administration--you remember the question. Mr. 
Quigley, you stated to Mr. Cleaver that you did not believe a 
back channel exists. Yet in Appendix 3, which is already in the 
record, of the Majority staff report, there is an email from 
acting CEO Allen Parker to you regarding this political 
appointment. Are you aware of that?
    Mr. Quigley. I did see the email in the report, yes.
    Mrs. Beatty. And you still have the same response that you 
had after it, in quotes, says ``political?''
    Mr. Quigley. I interpreted that, ``political,'' as simply 
he was an appointee into the CFPB.
    Mrs. Beatty. I'm sorry. My time is up, and I yield back.
    Chairwoman Waters. The gentleman from Texas, Mr. Gonzalez, 
is recognized for 5 minutes.
    Mr. Gonzalez of Texas. Thank you, Madam Chairwoman, and I 
want to begin by thanking Anne Cruz, a dear constituent of 
mine, who is watching from back home.
    I will begin by saying, former Chairwoman Duke, today you 
have the auspicious honor of being the first board member, I 
believe, to testify in front of Congress since Enron. You 
allege in your testimony that you, and indeed the rest of the 
board, learned from public statements that over 20 times the 
number of employees were terminated than originally disclosed 
to you by management, yet no one in management was fired for 
this.
    At this point, you and the board retained independent 
counsel to conduct a full and unfettered investigation into the 
scope and causes of misconduct. Allegedly, this is when the 
board acted to thoroughly repair the damage done--again, your 
words, not mine. Since then, Wells Fargo engaged in charging 
improper interest on your customers' accounts, sold unnecessary 
auto insurance, foreclosed on customers' homes after wrongful 
denial of loan modification agreements, and essentially threw 
people out on the street. And finally, purposefully reduced the 
customer investment returns on the sales of Wells Fargo 
Advisors' products by actively trading securities you had 
disclosed as long-term holds.
    All of this conduct is admitted in one consent order or 
another. There are many active and open orders. That is quite a 
lot to digest. I want to ask you, why shouldn't we simply 
remove the bank charter, break up the company, and let the 
banks out there that can run clean operations have your 
customers, or Wells Fargo's customers? How many years until you 
can properly serve your customers? You don't have to answer 
that. I know you already have, in one way or another.
    If any attorney steals their clients' funds--and I know 
this because I am a lawyer and practiced law for 20 years--and 
mixes their funds with clients or deceives them as to the 
nature and scope of representation of them, and consequences 
are disbarment and potential jail time, why would a bank's 
charter be any different? You can answer that.
    Ms. Duke. There were employees who committed criminal acts. 
You asked, was anybody fired? People were fired for the acts 
that they committed, and the information about them has been 
turned--
    Mr. Gonzalez of Texas. Was this management that was fired?
    Ms. Duke. Yes. Yes. In the case of sales practices--
    Mr. Gonzalez of Texas. Senior management?
    Ms. Duke. Senior management. The senior executive 
responsible for the community bank was terminated for cause.
    Mr. Gonzalez of Texas. Well, it is clear that this--
    Ms. Duke. The management of the auto division, I believe, 
was terminated. And in individual cases where there was 
misconduct, those employees were terminated and the appropriate 
suspicious activity reports filed, I believe.
    Mr. Gonzalez of Texas. Okay. Well, it is clear that you do 
not serve your clients' best interests, and I think you have 
admitted that already. If it were up to me, and I believe many 
members of this committee, on both sides of the aisle, a few of 
you would be in jail today. And certainly, if you were the 
president of the American Bar Association instead of the 
American Bankers Association, you would be disbarred today.
    I clearly hope that the Department of Justice continues to 
investigate these bad actions by bankers and board members 
across the country, and hopefully stops the malfeasance in this 
country. The American people are looking forward to this. And I 
yield back.
    Chairwoman Waters. The gentleman from Florida, Mr. Lawson, 
is recognized for 5 minutes.
    Mr. Lawson. Thank you, Madam Chairwoman, and witnesses, 
welcome to the committee.
    I was going to say that I won't ask the same questions that 
some of the other Members asked, simply due to the fact that 
they center around the same area. But one of the things that I 
want to know, and get you, Ms. Duke, to respond to is, it says 
that--in a 2017 independent investigation, a report was 
released into Wells Fargo's fraudulent account scandal. The 
board was supposed to accomplish three goals, and these are the 
ones that I want you to respond to, and you have said some 
things about them. But one was to get to the root cause of the 
company's sales scandal and identify solutions so it would 
never happen again, and restore trust in the bank.
    In response, Wells Fargo's board, from what I can gather, 
blamed it on ex-employees. But don't you think the board, 
yourself included, failed in oversight duty? By serving on the 
board, on those three issues that came up, how were those three 
issues handled?
    Ms. Duke. The root cause was found to be that the sales 
goals were inappropriately set, that they were too high, and 
that the sales management was aggressively pursued.
    Mr. Lawson. And to restore the confidence, what was 
discussed in the board--
    Ms. Duke. The sales goals were eliminated, the employees 
were terminated, and the new incentive plan was designed to 
reward customer service and to be more team goals than 
individual goals. What we found is that while there was some of 
the behavior to get the incentive, it was more to avoid 
criticism by the managers.
    Mr. Lawson. Okay. The reason why I was concerned about 
sales goals is, I have been involved in sales for maybe 40 
years, and I know that what happened is management does set 
these sales goals, for agents and so forth, for goals for you 
to try to reach. But I didn't know until today that banks would 
have such sales goals that would trickle down to all of the 
branches, so that they would go out and they were trying to 
attract more business.
    What I can't understand is how, even though you said these 
employees were terminated, how could managers who have been in 
the organization for a long time not want to monitor all of 
these branches of the sales goals when they knew--they had to 
know that something was going wrong.
    Even though you say that they were eliminated, I am sure 
Wells Fargo still has sales goals they have to meet. How is 
that handled now through the board when they establish goals 
that they want to meet, to be the third-largest bank? And I 
understand Mr. Quigley was saying about being a bank that 
provides resources to small businesses, to minority firms, and 
so forth. How do you all handle that now, in order to make sure 
that you do the things that are good in the marketplace, but 
not allow things to happen, such as 70,000 borrowers who bought 
car insurance that they didn't need, and about 20,000 of them 
may have had their vehicle repossessed as a result? How do you 
handle that now?
    Ms. Duke. Again, with the collateral protection insurance, 
once we found that issue, we quit requiring the force-placed 
insurance, so that requirement is no longer in place.
    Mr. Lawson. Mr. Quigley, did you want to respond to that?
    Mr. Quigley. The effort was made to one customer at a time, 
identify harm, and then be able to remediate it. And Charlie 
Scharf gave an update yesterday on the progress with respect to 
remediation and the aggressive approach that he intends to take 
to accelerate the timing that is required to get that done, and 
get that done right.
    Mr. Lawson. And a question that I might not be able to get 
answered, do you think Wells Fargo is too large?
    Mr. Quigley. I do not think Wells Fargo is too large. Wells 
Fargo needs to change its culture, and that is underway under 
the new CEO that we have recruited.
    Mr. Lawson. Okay. Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from 
Michigan, Ms. Tlaib, is recognized for 5 minutes.
    Ms. Tlaib. Thank you, Madam Chairwoman. Thank you so much 
for your leadership in creating this report. Have you all seen 
this?
    Ms. Duke. Yes, we have.
    Mr. Quigley. Yes.
    Ms. Tlaib. I know maybe you don't have it in front of you, 
but page 13 lists, kind of in a snapshot of some of the abuses, 
which you call culture, but I call criminal schemes. You all 
made money off of the backs of poor people, off of working 
people. Fake accounts. Millions of people. We are not talking 
about a short period of time of one mistake. We are talking 
about from 2011 to 2016, literally enrolling millions of 
customers in banking products and accounts without their 
knowledge or consent. You are talking about 27,000 people 
impacted by unnecessary auto insurance. I actually would differ 
with my chairwoman on one thing, which is that I wouldn't call 
it unnecessary. I would call everything fraudulent, criminal. 
Unnecessary--the fact that you enrolled--bank customers 
literally had their vehicles repossessed following default 
arising from these added insurance costs, that they didn't 
need, and they didn't want.
    Corporate greed is a disease in our country. It is so bad 
that it infiltrates, and I don't like it when corporate America 
calls it a cultural issue. It is a crime to defraud Americans. 
Let's be very clear about that. And I don't want you to see my 
passion as, oh--this is not--it is the fact that I have the 
third-poorest congressional district in the country. Literally, 
our communities are front-line communities that get targeted by 
this, not the higher-income folks, but the folks who have two 
or three jobs, the folks who are trying to survive right now, 
who are in survivor mode, are being targeted.
    Ms. Duke, you were on the board since 2015. Mr. Quigley, 
you were on the board since 2013. Correct? On page 13, it talks 
about servicemember abuse. Between 2006 and 2016, Wells Fargo 
Bank charged servicemembers higher interest rates than allowed 
under the Federal law. You would consider that a crime, 
correct, Ms. Duke?
    Ms. Duke. I would.
    Ms. Tlaib. How about you, Mr. Quigley?
    Mr. Quigley. I would, and I would also say that for the 
servicemember remediation that was undertaken, Betsy took the 
lead and was very assertive in moving that forward and I would 
be proud of her.
    Ms. Tlaib. Well, in the meantime, people got their cars 
repossessed. I don't know what is going on with their credit 
reports, and that is something I am working with the chairwoman 
on, but trying to get people's credit reports to get cleaned up 
from this. And that is impacting people's employment, access to 
housing, all of these opportunities they need to thrive.
    From 2013 to 2017, you were both on the board. We are not 
talking about one year, or 6 months of bad behavior, and 
criminal scheming of working-class folks. We are talking about 
over a decade for many of these criminal schemes and these 
corrupt kind of behaviors. And having your Chair come before 
this committee yesterday and not be able to really truly answer 
some of the questions for various details was troubling to me.
    I need to know, from both of you--it was courageous of you 
to come before this committee, but this needs to be read by 
every single board of directors. Every single one of them needs 
to read this, because I don't think they realize this is not 
only about numbers, but behind every single report in here is 
actually a story of a human being who was impacted by these 
criminal schemes.
    I want to talk about something that--I have a CEO pay tax, 
and I really, really want to emphasize to you all to try to 
incorporate an incentive here. If you have your CEO getting 
paid 200 times more than your own employees, and they have to 
get on public subsidy, don't you think that is unfair? Do you 
think that right now, having your bank tellers and the folks 
who work in your institution getting paid 200 times less than 
the CEO is problematic?
    Ms. Duke. I have been a bank teller, and I have been paid 
at the lowest rates, and I know how difficult it is to survive 
on that. I think we need to address both the way we compensate 
them but also career pathing, because I was able to learn and 
take advantage of industry education and opportunities--
    Ms. Tlaib. And, Ms. Duke, at the same time, right now, they 
are actually in line to get public subsidies, food assistance, 
things that we, the public, have to pay for because you are 
allowing corporate greed to continue to fester within your 
company.
    Mr. Quigley, do you agree that we should be paying your 
workers a living wage, that they shouldn't be paid close to 300 
times less than what your CEO is getting paid?
    Mr. Quigley. Charlie responded to that yesterday with 
respect to what he is doing on the minimum wage, and I have 
nothing to add.
    Ms. Tlaib. He works for you, right? Charlie works for you?
    Mr. Quigley. I am a former member of the board. I recruited 
him, and I am pleased that I was able to get him to say yes.
    Ms. Tlaib. Are you pleased with the fact that you left 
people--thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you. The gentleman from South 
Carolina, Mr. Timmons, is now recognized for 5 minutes.
    Mr. Timmons. Thank you, Madam Chairwoman. Ms. Duke, can you 
explain what the normal duties and responsibilities were for 
you and other board members?
    Ms. Duke. Yes. We received materials in connection with 
meetings. We scheduled meetings. We had meetings of the board, 
meetings of the committees.
    Mr. Timmons. How often did you meet? How often were your 
meetings?
    Ms. Duke. How many meetings did you take out of your 
calendar last week?
    Mr. Quigley. When I resigned, I removed 85 meetings from my 
calendar in the next 12 months, meetings or calls.
    Mr. Timmons. So, time commitment per week, per month, what 
would you guess? What is a good estimate?
    Mr. Quigley. There were big blocks of time last year when I 
was working fundamentally full-time, because I was working to 
recruit a new CEO, and many of your colleagues asked Charlie 
Scharf yesterday, ``Why would you accept such a difficult 
job?'' How would you like to be the guy who was recruiting him, 
to get him to say, yes?
    Mr. Timmons. Sure.
    Mr. Quigley. It was time-intensive. I haven't kept track of 
it on a per-hour basis--
    Mr. Timmons. Over the course of your--
    Mr. Quigley. --but I was absolutely, many times, working 
fundamentally full-time.
    Mr. Timmons. --tenure on the board, on average, 20 to 30 
hours a week? 15 hours a week?
    Mr. Quigley. Probably in the 20- to 30-hour range.
    Mr. Timmons. Is that the same for you, Ms. Duke?
    Ms. Duke. Since I became chairman, I have been available to 
the company full-time. I don't make other commitments.
    Mr. Timmons. That was my next question. What other jobs or 
positions do you hold outside of the board, or did you hold 
outside of the board?
    Mr. Quigley. I am the chairman of the board of Hess 
Corporation. It is the only other public company where I am on 
the board.
    Mr. Timmons. Did you have any outside, other--
    Ms. Duke. I do not.
    Mr. Timmons. Okay. I appreciate that.
    I am slightly confused and don't really understand why we 
are holding this hearing today. The chairwoman called for both 
of you to resign, and you did. There is nothing either of you 
can do at this point to help right the ship that is Wells 
Fargo. So with all this going on in the world today, and in the 
financial system, why are we publicly, to some degree, 
humiliating two former board members of Wells Fargo right now? 
I don't know that this is the best use of our time. I 
appreciate you all sitting through it and showing up. I am not 
sure I would have.
    But I am not excusing the performance. Obviously, it is 
abundantly clear from the Majority and the Minority reports 
that a lot went wrong and several missteps were made, which, 
partnered with the dereliction of Obama Administration 
regulators led to a disastrous result for your bank and its 
customers. But I still don't understand what dragging you two 
in here today is accomplishing. I think it is good that you 
resigned. I think it was the right decision, given the 
circumstances. It is very unfortunate. And I am encouraged by 
your new CEO. His testimony yesterday was productive, I think.
    I hope that Wells Fargo can get back on the right track, 
and I know this committee will continue to keep a close watch, 
along with the regulators, to help regain the trust of the 
customers of this committee and of the American public.
    Thank you for coming here, and with that, I yield back.
    Chairwoman Waters. Thank you. The gentleman from Illinois, 
Mr. Garcia, is recognized for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Madam Chairwoman, and 
Chairman Green, for convening this hearing, and to the two 
witnesses, thank you as well.
    Regulators have been working on Wells Fargo since 2016 to 
bring the bank into compliance when the bank's current troubles 
first came to light. The written testimony that each of you 
submitted to the committee claims that since that time, the 
board of directors has focused on changing the culture at Wells 
Fargo, but there is an important change I think you left out.
    This week, the Roosevelt Institute published that from 2016 
to 2019, Wells Fargo more than doubled the money it put towards 
dividends and stock buybacks, from $12.5 billion to $30.2 
billion. Ms. Duke and Mr. Quigley, did you vote in favor of 
these dividends and buybacks?
    Ms. Duke. We voted in favor of the capital plan that 
included those, yes.
    Mr. Garcia of Illinois. It included those? That is a yes, 
from both of you?
    Mr. Quigley. Same.
    Mr. Garcia of Illinois. Ms. Duke and Mr. Quigley, yes or 
no, did you and the rest of the board decide to direct more 
resources toward share buybacks and dividends to boost the 
company's share price? Yes or no?
    Mr. Quigley. The capital plan is very clear, and all of the 
elements in it.
    Mr. Garcia of Illinois. That is a yes?
    Mr. Quigley. Yes, we did approve the capital plan.
    Mr. Garcia of Illinois. Both of you?
    Ms. Duke. Yes.
    Mr. Garcia of Illinois. Which included that. Thank you. So, 
you decided to use more money to pay off shareholders. The 
Majority staff report found that, ``Wells Fargo's board and 
management prioritized financial and other considerations above 
fixing the issues identified by regulators.'' To me, the fact 
that Wells Fargo doubled the money it spent paying off 
shareholders during this time is a clear example of that.
    Ms. Duke and Mr. Quigley, yes or no, do you agree that 
Wells Fargo could have used those billions to invest in its 
workforce, which may have, in turn, fixed its internal culture? 
Yes or no?
    Ms. Duke. I would say that we have approved considerable 
expenses in order to fix the issues that we need to fix at 
Wells Fargo, and we have not--
    Mr. Garcia of Illinois. Could it have gone further?
    Ms. Duke. --limited those budgets.
    Mr. Garcia of Illinois. Mr. Quigley?
    Mr. Quigley. The number-one priority is absolutely 
remediating those issues, and that was made clear by Mr. Scharf 
yesterday.
    Mr. Garcia of Illinois. But doing something differently 
could have advanced the cleaning up of the culture.
    Last year, I introduced the Reward Work Act, H.R. 3355, a 
bill that bans share buybacks and allows company employees to 
directly elect one-third of their corporate board. I think it 
is fair to expect companies to invest in their people and in 
growth rather than simply lining shareholders' pockets.
    In 2013, we first learned, from the Los Angeles Times, 
about Wells Fargo's fake accounts and the pressure tactics that 
drove employees to open them. The Committee for Better Banks, a 
group of bank workers organizing for better conditions, helped 
bring these practices to light, and Wells Fargo responded by 
firing thousands of front-line employees.
    Ms. Duke, and Mr. Quigley, was firing front-line employees 
the correct response to credible reports of management issues 
at the bank?
    Ms. Duke. There was further action that needed to be taken 
by the managers at the banks. However, whenever an employee is 
found to have engaged in a dishonest act against a customer, we 
have no choice but to terminate them.
    Mr. Garcia of Illinois. Mr. Quigley?
    Mr. Quigley. The same.
    Mr. Garcia of Illinois. The culture of a company and 
accountability in a company always starts at the top. Yes or 
no, would you agree?
    Mr. Quigley. Yes.
    Ms. Duke. Yes.
    Mr. Garcia of Illinois. As board members, you both bear 
responsibility for what went on at Wells Fargo when you were at 
the top. Your testimony expresses regret about what happened to 
the bank's workers, but here we are--bank workers alerted the 
public to your bank's practices and they got fired. You both 
resigned before testifying today, perhaps to absolve yourselves 
of what happened on your watch.
    Do you think it might be a better idea to let employees 
elect corporate board members for themselves?
    Mr. Quigley. I'm sorry. I didn't understand your question.
    Mr. Garcia of Illinois. Do you think it might be a better 
idea to let employees elect corporate board members for 
themselves, to be represented?
    Mr. Quigley. I believe in the corporate governance model 
that shareholders elect the directors.
    Ms. Duke. I agree with Mr. Quigley.
    Mr. Garcia of Illinois. Okay. So, it is clear you are 
consistent in that.
    Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Taylor, is recognized for 5 minutes.
    Mr. Taylor. Thank you, Madam Chairwoman. I appreciate you 
both being here. I served as a bank board member for 12 years 
at a community bank back in Texas, and I will say that where 
you are today is somewhere where I think not a single member of 
a bank board would ever want to be.
    And I was wondering if you could--actually, let me back up 
for one second and just say that I find some of the actions 
that were taking place at Wells Fargo to be criminal in nature. 
I certainly agree with you, Madam Chairwoman, and some of my 
colleagues, that they were criminal in nature. I am surprised 
that no one has been prosecuted. And I certainly would agree 
with bringing in either the U.S. attorney or the district 
attorney for the jurisdictions that comport with us, to ask why 
has no one been prosecuted? Because I think there is an example 
to be made here. This is unacceptable behavior, and it is 
criminal.
    And I think there is agreement in this room that it was 
criminal and therefore there should be some discussion with the 
people who prosecute. What the heck? It is not up to these 
guys. They are not on the bench. We are not on the bench. But I 
think it is worth asking that question.
    Circling back to being on a bank board, do you have any 
lessons learned that you would tell--there are 5,500 banks in 
the United States. There are 50,000 to 100,000 people who serve 
on bank boards across this country, for banks large and small. 
And I hope you don't stop here. I know this is an unpleasant 
thing, but I think you have something to teach other bank board 
members about how to run a bank.
    You have been through one of the most difficult problems 
that a bank has been through in the last decade. What do you 
have to teach, or what would you say to other bank board 
members, or prospective bank board members about when you get 
in this situation, which is thrust on you. It is nothing you 
designed, but something that was thrust upon you--what lessons 
have you learned?
    Mr. Quigley?
    Mr. Quigley. There is no question that the communications 
with regulators, who have a significant presence inside these 
enterprises, need to be robust and timely, and you have to be 
aggressive in terms of your follow-up. And when it comes to 
determining that there is a need for change to occur in a 
culture, you have to be assertive to make sure that, in fact, 
that change occurs. And that might mean that you have to make 
substantial changes in the leadership team, including at the 
top. I acknowledge that in my 6 years at the bank, I have 
worked for 4 CEOs.
    Mr. Taylor. And actually, just to quickly go into that, 
because that actually was something I wanted to ask about, is 
your relationship with the regulators. In my 12 years on a bank 
board, other than the bank examination reports that the bank 
would yield every 18 months, that was the only interaction I 
ever had with a regulator. I never got a call or an email from 
a bank regulator.
    Your earlier testimony that you were talking almost daily 
to regulators honestly was a surprise to me. Was that typical 
prior to the problems at Wells Fargo? What was your 
interaction? What led to, ``almost daily interaction with 
regulators?''
    Mr. Quigley. During that period of time, I was chairing the 
CEO search committee, and so I was interacting with them on a 
regular basis because of the requirement for me to be able to 
obtain a supervisory non-objection for the individual whom I 
was recommending.
    But prior to the sales practices issue being made public, 
and for the board to be informed and aware, I think a quarterly 
kind of touch would have been much more expected. But with the 
issues that we were dealing with, and the aggressive approach 
to remediation, that interaction with the regulators then 
simply became much more frequent and of much greater substance.
    Mr. Taylor. What was the standard practice--and I guess 
this would be for all banks of your size--for regulator-board 
interaction? Because again, my experience was 18 months, have a 
meeting, and then that is it. But yours clearly was very 
different.
    Ms. Duke. If I could, most of my career was as a community 
banker, and so my board did not interact with the regulators. 
In the community bank, they didn't even come in for the annual 
review of the annual activities. When there was a close-out 
conference with the regulators, I think my audit committee 
would come in and meet with the examiners, but they didn't meet 
with the board.
    When I joined the board at Wells Fargo for the first few 
years, maybe 3 years, the regulators would come in and present 
annually their reports of their examinations, but that was 
really the extent of the contact.
    The other piece, though, was that each of the consent 
orders that we signed had a requirement for an oversight 
committee of the board. Soon after I got there, they asked me 
to serve on that committee, and then later to Chair it, and 
that did involve the reporting that was on the consent orders. 
And so, I had regular contact with the examiners then about 
those consent orders and the progress on the work under the 
consent orders.
    Mr. Taylor. Thank you. I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from New 
York, Mrs. Maloney, is now recognized for 5 minutes.
    Mrs. Maloney. I thank the Chair for yielding.
    Mr. Quigley, I want to ask you about an email exchange you 
had with the former CEO of Wells Fargo, Allen Parker. That is 
in Appendix 3 of our Majority staff report. You and Mr. Parker 
were discussing a series of conversations that he had with a 
political appointee at the CFPB, Eric Blankenstein, about 
resolving the bank's regulatory issues with the CFPB.
    Let me read what Mr. Parker wrote to you on May 17, 2019. 
He said, ``Eric also assured me that there would continue to be 
political oversight of the engagement with us.''
    Mr. Quigley, are you familiar with this email? Yes or no?
    Mr. Quigley. Yes.
    Mrs. Maloney. Okay. What did you think Mr. Parker meant by 
political oversight of the relationship with Wells Fargo? Did 
you understand that he meant Mr. Blankenstein was promising a 
softball approach to Wells Fargo?
    Mr. Quigley. I did not interpret it that way, nor do I 
think that is, in fact, what occurred.
    Mrs. Maloney. Then, what do you think occurred? Do you 
think it is appropriate for a political appointee at the CFPB 
to promise a bank softer treatment than the career staff is 
recommending? Do you understand that provides an appearance of 
possible corruption?
    Mr. Quigley. Let me just provide a little bit of context in 
terms of my meetings with Mr. Blankenstein. He came to the 
board in July of, I believe it was 2018. No, no. It might have 
been 2017. I am not sure which year. But he spoke on behalf of 
the CFPB at the board meeting in July, and I started trying to 
have a quarterly meeting with him when I was in Washington. At 
each of those meetings, I was accompanied by someone from Wells 
Fargo, and he was accompanied by others from the CFPB.
    Mrs. Maloney. Well, let me ask you a different question. Do 
you think it is appropriate for a political appointee, a 
political appointee at the CFPB to come to a meeting with a 
bank and promise a bank softer treatment than the career staff 
is recommending?
    Mr. Quigley. No, I don't think that is appropriate, and I 
am not even sure that it occurred.
    Mrs. Maloney. Well, what do you think he meant when he said 
that he would continue, ``political oversight of the 
engagement?''
    Mr. Quigley. I think he was talking about his departure 
from the CFPB and that his successor, who was going to be a 
political appointee, might have continued touch with the bank.
    Mrs. Maloney. Well, it doesn't read that way to me. And I 
have no further questions.
    Chairwoman Waters. Ms. Porter, we will again give you an 
opportunity to question the witnesses. I started into the 
close, but we will rescind that and we will go forward.
    Ms. Porter. Thank you very much, Madam Chairwoman and Mr. 
Ranking Member. I really appreciate the accommodation.
    I wanted to ask Ms. Duke and Mr. Quigley about your board 
compensation. Ms. Duke, how much did you make last year on the 
board?
    Ms. Duke. $630,000.
    Ms. Porter. And Mr. Quigley?
    Mr. Quigley. $417,000.
    Ms. Porter. Okay. About how many times last year did the 
board convene in person, did you convene a full board meeting 
in person?
    Mr. Quigley. Full board in person, I am guessing, but 
perhaps 12. I had probably 90 meetings in relation to my 
committee meetings and my calls--
    Ms. Porter. The full board met only 12 times.
    Mr. Quigley. A big chunk of last year, I was working full-
time.
    Ms. Porter. Well, what about the other company you served 
on the board of? Were you not working full-time for them?
    Mr. Quigley. Not full-time, no.
    Ms. Porter. So if you were working full-time for Wells 
Fargo on the board--
    Mr. Quigley. Portions of that time, while I was doing the 
CEO search, it required my involvement every single day. That 
was the point I was trying to make.
    Ms. Porter. Got it. My question is about your thoughts as 
long-term board members of Wells Fargo, about the remaining 
board, because the folks who are sitting on the board today--
and I have their bios here--these are folks who oversaw data 
breaches: Staples; a health marketing scandal at Kellogg; a 
massive data breach of $110 million at Target; the auditor for 
AIG--these are not exactly Eagle Scouts.
    I would like to have you go on record with what your 
opinion is about the capacity of the current board in light of 
the number of them who have come from scandal-ridden or 
consumer harm situations, to steer Wells Fargo in the right 
direction going forward?
    Mr. Quigley. I have confidence in the capability and the 
integrity of the members of the board with whom I once served.
    Ms. Porter. Ms. Duke?
    Ms. Duke. I do, and I think the expertise of those 
directors is excellent. As we have repopulated our board, 
reconstituted our board, we have added a number of new 
directors. When I joined the board, I was the only director on 
the board who had banking experience. There are now, even 
without me, I believe four directors who have banking 
experience.
    Ms. Porter. Is the board actively seeking additional--
seeking replacements for you two, and in the past in changing 
board members? Is Wells Fargo seeking people who have presided 
over major corporate or consumer scandals to populate its 
board, or is that just a coincidence? Is that a qualification 
these days, to be on the Wells Fargo board?
    Ms. Duke. That is not what we are actively seeking. 
However, I would say that particularly in the case of Celeste 
Clark, who is an executive at Kellogg, her experience in 
dealing with and remediating that crisis, that health crisis, 
and also as a public policy--she was their public policy 
officer, I believe, for a time, and her experience in that 
situation has been invaluable to our board.
    Ms. Porter. Do you think that the compensation of board 
members is in line with the number of hours that they work?
    Ms. Duke. It is in line with the level of responsibility 
that they take in and with the compensation for other directors 
of other similar institutions.
    Ms. Porter. Well, let's talk about that responsibility. 
What are the consequences or personal responsibility that you 
or Mr. Quigley have suffered as a result of presiding over the 
board during these scandals?
    Ms. Duke. We are subject to liability for our actions as a 
director.
    Ms. Porter. Does Wells Fargo have directors' and officers' 
liability insurance--
    Ms. Duke. They do.
    Ms. Porter. --that would cover those claims?
    Ms. Duke. They have directors and officers liability 
insurance that covers those.
    Ms. Porter. So for the rounding, between the two of you, 
half a million dollars a year. What are the responsibilities 
for which you deserve such tremendous compensation? What are 
the consequences? What are the risks that you are personally 
exposed to as a result of serving on the board?
    Mr. Quigley. The board's role is to oversee the company's 
management and business strategies, to evaluate the performance 
of its CEO, to monitor the performance of that CEO, and to work 
through the succession plan and selection of the CEO. That was 
the point I was trying to make earlier, where I was spending 
full time.
    Ms. Porter. Thank you.
    Chairwoman Waters. I would like to thank the witnesses for 
their testimony today.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is now adjourned.
    [Whereupon, at 12:51 p.m., the hearing was adjourned.]

                            A P P E N D I X


                             March 11, 2020
                             
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