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September 7, 2017 By Richard Bowen

Wells Fargo: The Poster Child of Greed & Fraud

Source: Ildar Sagdejev, own work, GFDL

Wells Fargo has now become a never ending story of greed and fraud as the charges against them continue and even more charges come to light.  It now looks as if they have uncovered an additional 1.4 million fake bank and credit card accounts for a total of up to 3.5 million accounts from their previous number of approximately 2.1 million. 

Just this July, Wells Fargo admitted to forcing up to 570,000 borrowers into unneeded auto insurance. About 20,000 of those customers may have had their cars repossessed as a result of the unnecessary insurance costs.

And here’s another “mistake” – they’ve recently discovered that thousands of customers were enrolled in online bill pay without their authorization. The review found 528,000 potentially unauthorized online bill pay enrollments for which they’ve agreed to pay $910,000 in refunds to customers.

Jaret Seiberg, an analyst at Cowen Washington Research Group, comments, “Every new disclosure seems to expand the scope of the bank’s troubles, which creates the perception that the scandal is getting bigger rather than going away.”

Costly “mistakes.” Wells Fargo has agreed to a $142 million national class action settlement to cover fake accounts that go back to 2002 plus another $6.1 million to refund customers for unauthorized bank and credit card accounts.

The problem? Well, the bank has blamed unrealistic sales goals placed on employees for encouraging the unauthorized bill pay and bank account openings. “We apologize to everyone who was harmed by unacceptable sales practices that occurred in our retail bank,” Wells Fargo CEO Tim Sloan said in a recent statement.

Gretchen Morgenstern of the New York Times comments, “the mounting infractions at Wells Fargo are getting hard to track without a score card.” She asks if the bank misled the U.S. Congress during last fall’s hearings “when it characterized its widespread opening of unauthorized bank accounts as a one-off problem in an otherwise clean operation?” 

John G. Stumpf, Wells Fargo’s former chief executive, was asked specifically if the bank had uncovered other types of misconduct regarding other bank products, besides the then in-question credit card and account openings. He responded, “We believe that the activity at issue here was limited to certain team members within the Community Banking Division.”

However, before the hearings, the bank was well aware of other problematic activities, such as charging customers for auto insurance that was not needed.  This has led to 33 consumer groups asking the Senate Banking Committee and the House Financial Services Committee to call for new congressional hearings, as have 11 members of the Senate Banking Committee itself.

Senator Sherrod Brown of Ohio, image source: United States Senate – Public Domain

Senator Sherrod Brown of Ohio, the Senate Banking Committee’s ranking Democrat, is urging new hearings be held.  In an interview Thursday, he said: “I’m hopeful that we’ll have another hearing, and I plan to follow through on that. John Stumpf has a lot of explaining to do.”

Jeff Emerson, a spokesman for the House Financial Services Committee, provided a statement from Jeb Hensarling, the Texas Republican who leads it, “This latest revelation of customer abuse is further evidence of catastrophic mismanagement at the bank” … “As for the Financial Services Committee, our investigation is ongoing and we are deploying all necessary investigative powers to make sure people are held accountable.”

The violations and consistent misleading statements by Wells Fargo are problematic. How did a bank that once supposedly had a strong reputation as being there for customers get to this point? Their motto:

“Our product: SERVICE. Our value-added: FINANCIAL ADVICE. Our competitive advantage: OUR PEOPLE.”

REALLY? I’ve not seen evidence of this. As we’ve said over and over, it is not the company’s motto or posted ethics guidelines, or executives’ lip service that encourages honesty. Much of the financial crisis could have been prevented if the large banks had listened to their own employees and followed their own published ethics policies, instead of ignoring and then retaliating against those employees as Wells Fargo and others have.

We’ve learned that six years before the fake account scandals, two of Wells Fargo’s employees came forward regarding the bank’s sales practices. The process whistleblowers take involves lodging a complaint with OSHA (the Occupational Safety and Health Administration), which is the first stop for anyone who seeks whistleblower protection. OSHA is then supposed to investigate the complaints with the individual. In the Wells Fargo situation, they did not follow this process.

OSHA‘s mandate is to protect whistleblowers from employer retaliation even if the complaint filed turns out to be wrong. But in 2010, OSHA closed the cases Ms. Guitron and Ms. Klosek filed, based on a conversation with the bank’s lawyer, who was misidentified by OSHA in their final report as representing the whistleblowers.

“OSHA really let these whistleblowers down,” said Benjamin Edwards, an associate professor of law at the University of Nevada, who teaches whistleblower securities law. “If OSHA had done a diligent investigation, there’s a good chance that Wells Fargo would not have spiraled so far out of control.” 

“There’s multiple violations that deprived these two people of any opportunity for justice,” said Darrell Whitman, the former investigator on their cases in the Department of Labor’s Whistleblower Protection Program under OSHA.  He added, “OSHA’s withdrawal was improper and the case[s] should be reopened.” Mr. Whitman himself was fired from OSHA in 2015 for a litany of alleged offenses, including unauthorized release of government information. While at the agency, he says, he tried to inform then-Labor Secretary Tom Perez of his allegations of misconduct.

Mr. Whitman goes on to say that in his five years as an investigator, it was common practice to start an investigation only after a company had been informed of the substance of the complaint and delivered a “statement of position,” essentially a first form of defense for whistleblower complaints. Wells Fargo didn’t respond in Ms. Guitron and Ms. Klosek’s cases.

Ironically, Mr. Whitman has filed a lawsuit of his own with an independent federal agency, the Office of Special Counsel, against OSHA and his former manager there, Joshua Paul. The documents from the Wells Fargo whistleblowers, Ms. Guitron and Ms. Klosek, are part of that suit. In it, Mr.  Whitman accuses both OSHA and Mr. Paul of routine collusion with corporate defendants.

Mr. Edwards says, “Her [Guitron] experience illustrates how companies ignore internal whistleblowers at their peril”… “If Wells Fargo had taken these internal whistleblower complaints seriously, it would have saved [itself] from the catastrophic consequences it has experienced.”

Tim Sloan, Wells Fargo’s present CEO, tells employees the bank is on a “journey to restore trust.” To that end, it released the following statement about its current approach to whistleblowers: Wells Fargo does not tolerate retaliation against team members who report their concerns.

To date though not much Wells Fargo has said or done builds trust in the company. Wells Fargo, if you’re serious, be transparent, offer real apologies, hire back the people you retaliated against and offer just compensation. Establish a real culture of trust and service and be the first to offer a new model of behavior for the too big to fail banks!

Not that, given my history, I have any strong feelings about retaliation against whistleblowers!

Related Posts

Wells Fargo, Fried Again!
The Saga of Wells Fargo – Are Banks Reaping What They Sow?
Banking In the 21st Century: The Great American Ponzi Scheme at Wells Fargo (and all TBTF)

Jamie Dimon, CEO, JP Morgan Chase, Unsung Hero or Master of Spin?
Is The Press Deliberately Lying? And, If So, Why?

Tagged With: Wells Fargo

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Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.

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  • Wells Fargo, Fried Again!Wells Fargo, Fried Again!

Comments

  1. monday1929 says

    September 7, 2017 at 11:50 am

    Tim Sloan obviously does not get it, or he is furthering the cover-up; customers were not harmed by “unacceptable sales practices”, they were harmed by criminal activity originating from the top. Would he say that the bank robber with a gun was engaged in “unacceptable withdrawal practices”?
    Also not addressed is the millions owed to shareholders for the deceptive/fraudulent motive that was behind the whole sordid scheme- the lie about WF’s “cross-selling” prowess. Sloan should pay for the analysis to establish how much the shareholders overpaid for shares based upon false numbers. Note too Stumph’s lawyerly non-response limiting admission to only the “activity at issue here” in response to congressional questioning about broader illicit activities. Problem being, his sneaky phrasing indicates both coaching and knowledge that there Were other crimes taking place. And shame on the questioner for not asking the obvious follow-up question e.g., “Well Mr. Stumph, are you aware of other crimes your bank is committing that are not directly related to those under discussion today?”
    We need a “broken windows” policy for welfare queen bankers (approx. 15 Trillion in mostly secret (at the time) bailout money given, their mortgage drek on the fed’s balance sheet now), just like they advocate for the masses. We should agree with Slick Jamie and even take it a step further: eliminate virtually ALL the regulations, but then actually prosecute and jail white collar criminals when they commit fraud.
    Bankers must learn to accept personal responsibility for their failures and crimes- would any of them object to that, and if they do,why would they? A good first example would be the prosecution of Robert Rubin, as per the buried FCIC recos.

    • Richard Bowen says

      October 27, 2017 at 11:37 am

      Sorry for the delay in responding.

      I absolutely agree that we need to prosecute those committing white collar fraud. We did this in the 80’s Banking and S&L crisis, sending over 800 senior bankers to prison. However, no banking executive has even been prosecuted coming out of this last crisis. And trust me, it is not because of lack of evidence.

      • monday1929 says

        October 27, 2017 at 2:12 pm

        Hello Richard, and certainly no need to apologize. I am going to try to get my “Broken Windows Policy” meme out there. This criminal crew believes it should be applied to the underclass, why not for themselves as well?
        Keep up the good fight.

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