Senators Demand Testimony from Equifax CEO in Spite of Retirement
The Senate demanded testimony from former Equifax CEO Richard Smith Tuesday, despite his retirement in the wake of a massive data breach.
September 26, 2017 at 05:04 PM
4 minute read
A year after former Wells Fargo CEO John Stumpf retired in the throes of the bank's sales practice scandal, Equifax CEO Richard Smith has taken a similar path as the credit reporting agency continues to reel from a data breach that potentially compromised the personal information of nearly half the U.S. population.
But Smith's retirement has done little to dampen lawmakers' appetite for grilling Smith as they did Stumpf last year.
On Tuesday, following the announcement of Smith's abrupt retirement, Democrats on the Senate Banking Committee made clear that they still want the Equifax executive to appear before them at a hearing scheduled for next week.
“I hope [Smith] still comes in front of the committee,” said Sen. Jon Tester, during his questioning Tuesday of U.S. Securities and Exchange Commission Chairman Jay Clayton.
Tester's call was echoed by Sen. Sherrod Brown, the top Democrat on the banking committee, along with Sen. Elizabeth Warren and other Democrats, who also zeroed in on the $18.4 million in retirement benefits that Smith may receive.
“It's not real accountability if the CEO resigns without giving back a nickel in pay and without publicly answering questions. Mr. Smith, along with the new chairman and the new interim CEO, should all testify before the Senate Banking Committee,” Warren said in a statement. “The American public deserves answers about what went wrong at Equifax and what the company plans to do going forward.”
An Equifax representative said, “Mr. Smith is scheduled to testify before Congress. It is up to the committees whether others from Equifax testify. We will fully cooperate with Congress, as we have since this cybersecurity incident was first disclosed.”
Equifax is facing scrutiny far beyond the Senate's halls. In a rare move earlier this month, the Federal Trade Commission confirmed it is investigating the Equifax breach. The SEC is also expected to do its own investigation because three managers sold a combined $1.8 million worth of shares just days after Equifax learned of the breach, avoiding the drop in the company's stock that followed the public disclosure. Equifax said the three executives were not aware of the breach at the time of their trading.
With Clayton testifying before them Tuesday, senators inquired about the SEC's interest in Equifax. When asked by Brown whether it was appropriate for Equifax executives “to retire and keep their bonuses and stock awards,” Clayton declined to comment, saying it would be inappropriate to do so because an Equifax-related matter could come before the commission in the future.
“Do I believe that if executives have profited from a high stock price that's the result of failure to disclose—or other acts that are clearly violations of our securities laws—should there be an ability to get back those gains? Yes I do,” Clayton said.
Senators last year seized on the Wells Fargo scandal to push for regulations making it mandatory for executives to turn over millions of dollars in compensation for misconduct and wait longer for bonus pay. On Tuesday, when asked about the SEC's pending consideration of a clawback regulation, Clayton gave no specific timeline for finalizing the rule.
“It is one of many mandates” of the Dodd-Frank Act, Clayton said. “I intend to finish the mandate. There is a prioritization. I am going to be very open with this committee and the American people in the Regulatory Flexibility Agenda about our priorities, and I welcome your continued input on how we've prioritized those.”
Sen. John Kennedy, R-Louisiana, urged the SEC to take a “trust but verify” approach toward Equifax, saying it “may well be” that the managers were unaware of the breach at the time of their sell-off.
Clayton said he could not confirm or deny any SEC investigation.
“I'm not going to comment on that specific matter for the reasons I've discussed. We don't comment on pending investigations, including on whether they actually are pending,” Clayton said.
But, he added, “I'm not ignoring this or other events like it.”
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