WASHINGTON — Sen. Elizabeth Warren, D-Mass., introduced legislation Wednesday that would require executives of large corporations to serve jail time when their companies commit crimes, including for violations of civil law.
In unveiling the bill, Warren cited the recent resignation of Tim Sloan as Wells Fargo’s CEO following a string of consumer-related scandals at the bank.
“Last week, after years of pressure, [Wells Fargo] finally parted ways with its second chief executive in three years,” Warren wrote in an op-ed for The Washington Post. “But that’s not nearly enough accountability. It’s time to reform our laws to make sure that corporate executives face jail time for overseeing massive scams.”
Warren has previously called for stiffer punishments for executives, unveiling a bill last year to create a permanent law enforcement unit to investigate potential criminal activity at large financial institutions and require big-bank executives to certify that there is no criminal conduct or fraud within their company.
In addition to reintroducing that legislation, her new bill announced Wednesday would go further. The Corporate Executive Accountability Act would expand criminal liability to executives of large companies that are found guilty of any crime, or that are found liable by a regulator for violations of civil law that negatively affect finances of 1% of the U.S. population or 1% of any state’s population.
The punishment for any violation under the legislation would be up to a year in jail, while a second violation could lead to up to three years in jail. The bill builds on other existing laws — including the Food, Drug and Cosmetic Act and the Clean Air Act— that hold executives liable when company negligence is found to have caused harm to the public.
“If top executives knew they would be hauled out in handcuffs for failing to reasonably oversee the companies they run, they would have a real incentive to better monitor their operations and snuff out any wrongdoing before it got out of hand,” Warren wrote in The Washington Post.
The Ending Too Big to Jail Act, which she originally introduced in March 2018, would re-form a special watchdog created at the height of the financial crisis to help oversee the government’s bailout of financial institutions. The Special Inspector General for the Troubled Asset Relief Program would be renamed as the Special Inspector General for Financial Institution Crime, and would have the authority to investigate criminal activity at financial institutions.
“Corporations don’t make decisions, people do, but for far too long, CEOs of giant corporations that break the law have been able to walk away, while consumers who are harmed are left picking up the pieces,” Warren said in a statement. “These two bills would force executives to responsibly manage their companies, knowing that if they cheat their customers or crash the economy, they could go to jail.”
Warren was a vocal critic of Sloan, and responded to the March 28 announcement that he would retire after heading the bank for two years that it was “about damn time.”
“Tim Sloan should have been fired a long time ago,” Warren said in a tweet. “He enabled Wells Fargo’s massive fake accounts scam, got rich off it, [and] then helped cover it up.”
Sloan became president and CEO of the bank in October 2016, after John Stumpf retired in the wake of a scandal in which employees created thousands of bogus customer accounts.
But under Sloan, Wells Fargo has faced even more scandals, from settling lawsuits alleging that the bank overcharged customers for auto insurance and home loans to overcharging veterans for home loans and false certifications of FHA loans.
Lawmakers on both sides of the aisle applauded Sloan’s retirement, and reiterated previous requests for immediate sweeping reforms at the bank.