CASE 1: Wells Fargo
- Federal regulators reveal Wells Fargo employees secretly created millions of unauthorized bank and credit card accounts without their customers knowing it. The bank is hit with a $185 million fine. Wells Fargo says it has found 1.4 million additional phony accounts. This brings the total number of fake accounts to 3.5 million. Before lawmakers on Capitol Hill, CEO John Stumpf is accused of running “a criminal enterprise.”
- Wells Fargo says 5,300 employees were fired for related reasons. Wells Fargo promises to abandon unrealistic sales goals. Wells Fargo employees blamed their bosses for effectively encouraging fake accounts. “If we didn’t hit our numbers, branch managers would make us stay after work for an hour, with no pay, to cold call customers and try to sell accounts,” Graham Gourley, who worked as a Wells Fargo banker in Charlotte until 2012, told CNNMoney.
- Wells Fargo is accused of illegally repossessing service members’ cars. The company agrees to pay $24 million to settle charges. The DOJ claims the bank took 413 cars without a court order, which violates federal law.
- Wells Fargo acknowledges it retaliated against workers who tried to blow the whistle on the fake accounts. (Wells Fargo would find ways to fire employees “in retaliation for shining light” on sales issues. It could be as simple as monitoring the employee to find a fault, like showing up a few minutes late on several occasions. “If this person was supposed to be at the branch at 8:30 a.m. and they showed up at 8:32 a.m, they would fire them,” the former human resources official told CNNMoney.)
- A new report from independent directors on the Wells Fargo board reveals the bank prepared an internal report in 2004 about practices that may encourage employees to create fake accounts. Former executives are asked for money back. The bank claws back $75 million from two former executives for their roles in the fake accounts scandal, including another $28 million from former CEO John Stumpf.
- Wells Fargo is accused of modifying mortgages without authorization from the customers. That means some customers could have ended up paying the bank more than they owed. It’s unclear how many customers were affected. The bank admits it charged at least 570,000 customers for auto insurance they did not need. Wells Fargo says an internal review found about 20,000 customers may have defaulted on their car loans for related reasons.
- Wells Fargo is sued for allegedly ripping off small businesses. A lawsuit accuses Wells Fargo of overcharging small businesses for credit card transactions by using a “deceptive” 63-page contract to confuse them.
- Wells Fargo says it wrongly fined mortgage clients. Wells Fargo admits that 110,000 mortgage holders were fined for missing a deadline — even though the delays were the company’s fault. The Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency announce that they are fining fine Wells Fargo $1 billion for the car insurance and mortgage abuses.
- Regulators say Wells Fargo sold dangerous investments it didn’t understand. Regulators order the bank to pay back $3.4 million to brokerage customers because advisers recommended products that were “highly likely to lose value over time.”
- Wells Fargo admits it illegally repossessed more service members’ cars. The company says it found that it had taken vehicles from another 450 service members. Wells Fargo agrees to pay an additional $5.4 million, according to the Justice Department. The company promises refunds.
- The city of Sacramento, California, accuses Wells Fargo of a “long-standing pattern and practice” of illegal lending in minority and low-income communities that reduced home values, limited property tax revenue and drove up foreclosures. The bank says the allegations “do not reflect how we operate in the communities we serve” and says it will “vigorously defend” its lending record. (Wattles, Geier, Egan & Wiener-Bronner. 2016 & 2018)
The ethics code on Wells Fargo’s site displays that they have a responsibility to always act with honesty and integrity, and in doing so they earn the trust of their customers (by behaving ethically, and rewarding open, honest communication, and by holding themselves accountable for their decisions and actions.) (A screenshot from: Wells Fargo 2017.) In this case Wells Fargo went against every principle they claimed to stand by. They violated the rights of their customers as well as the rights of their employees, and this all came from instructions from management. (A new report from independent directors on the Wells Fargo board reveals the bank prepared an internal report in 2004 about practices that may encourage employees to create fake accounts. Wattles, Geier, Egan & Wiener-Bronner. 2018). Staff were harassed and forced to stay late if they failed to make unrealistic sales targets, and even encouraged to create fake accounts in order to keep their jobs. This bank operated in a criminal manner, and above the law. Wells Fargo even acknowledged that it retaliated against workers who tried to blow the whistle on the fake accounts. According to former human resource official, Wells Fargo would find ways to fire employees “in retaliation for shining light” on sales issues. It could be as simple as monitoring the employee to find a fault, like showing up a few minutes late on several occasions. “If this person was supposed to be at the branch at 8:30 a.m. and they showed up at 8:32 a.m, they would fire them.” (Egan. 2016) This is a clear violation of HR policies, and once again the law. Staff who tried to remain ethical we bullied, and only staff willing to behave corruptly in order to keep their jobs were allowed to remain. However, once the scandal hit, then they too were fired. (5,300 employees were fired for related reasons. Egan. 2016). This is grossly unfair, and again violation of HR policies. The company had a toxic work culture using fear and intimidation to motivate employees to break the law. Surprisingly the HR department went ahead with firing whistleblower staff, even though they knew that the company could be sued. This went against the interest of the company and denotes reckless behaviour from HR who should’ve known better.
The list of charges against Wells Fargo continues, such as illegally repossessing service members’ cars, modifying mortgages without authorization from the customers – so that some customers could have ended up paying the bank more than they owed, selling dangerous investments that were highly likely to lose value over time, ripping off small businesses by overcharging their credit card transactions – using a deceptive 63-page contract to confuse them. This brings to light a total lack of accountability, and a clear lack of regulations in the industry that enabled this type of corruption to go on for as long as it did. As a bank, one would have expected them to be kept in check by audits – and their own moral compass, and when all else fails… the HR department. When staff members notified the company of the corruption, the HR department turned a blind eye, and then in actual fact turned on the ethical staff members by firing them. Thereby failing to protect staff from participating in illicit activity, as well as becoming co-conspirators.
Matt Egan. 2016. CNN: I called the Wells Fargo ethics line and was fired. https://money.cnn.com/2016/09/21/investing/wells-fargo-fired-workers-retaliation-fake-accounts/index.html/ Accessed on 07.04.2019
BBC. 2016 Wells Fargo boss urged to resign over accounts scandal. https://www.bbc.com/news/business-37419968/ Accessed on 07.04.2019
Matt Egan. 2016. CNN: Wells Fargo tries to kill fake account lawsuit. https://money.cnn.com/2016/11/25/investing/wells-fargo-lawsuit-forced-arbitration/index.html/ Accessed on 07.04.2019
Matt Egan. 2016. CNN: ‘Wells Fargo isn’t the only one’: Other bank workers describe intense sales tactics. https://money.cnn.com/2016/09/22/investing/wells-fargo-fake-accounts-banks/index.html/ Accessed on 07.04.2019
Matt Egan. 2016. CNN: Wells Fargo made me work overtime — without extra pay. https://money.cnn.com/2016/09/30/investing/wells-fargo-workers-wage-theft-overtime/index.html/ Accessed on 07.04.2019
Jackie Wattles, Ben Geier, Matt Egan and Danielle Wiener-Bronner. 2018. Wells Fargo’s 20-month nightmare. https://money.cnn.com/2018/04/24/news/companies/wells-fargo-timeline-shareholders/index.html/ Accessed on 07.04.2019
A screenshot from: Wells Fargo 2017. Our Code of Ethics & Business Conduct Living Our Vision & Values. URL: https://www08.wellsfargomedia.com/assets/pdf/about/corporate/code-of-ethics.pdf. Accessed on 07.04.2019
Figure 1. Paula Dobbyn and Blake Essig. 2016. Alaska customers caught up in Wells Fargo bank scandal. https://www.ktuu.com/content/news/Alaska-banking-customers-caught-up-in-Wells-Fargo-bank-scandal-395352521.html/ Accessed on 07.04.2019