As you might remember, high-pressure sales tactics at the bank let to the opening of thousands of bogus accounts and credit cards by the sales staff without the authorization of the actual account owners simply to rack up additional fees. Wells Fargo initially claimed that this criminal activity was simply a result of some unethical employees and only went on for about five years. It soon emerged, however, that management had received hundreds of complaints about the practice from both inside and outside the firm and were well aware of what was going on, frequently firing the whistleblowers who came forward. In addition, this scam had been running for over a decade, double the time Wells had originally claimed.
So far, of course, Wells Fargo has merely receive just another slap on the wrist for this criminal behavior, paying a $185 million fine for the abuses. But that didn't stop Wells from making it as hard as possible for customers to receive the restitution they were entitled to, trying to force each individual customer to go through arbitration to recover their stolen funds.
Now a shareholders' lawsuit against Wells is uncovering just how deeply the unethical mentality was entrenched at the firm. The first revelation is that it now appears this scam of bogus account openings had been going on for 15 years. In addition, there was something called "Hit The Streets Thursdays" where the Wells Fargo sales staff would go to Social Security offices and sites where undocumented immigrants would be working and try to get people to sign up for a Wells Fargo account, offering to waive the check cashing fee for doing so. Of course, those people were probably not informed that there were other fees on the account that would offset the check cashing fee. And once that one account was set up, it made it possible for the salesperson to set up multiple other bogus accounts and generate fees from those.
Management was well aware of these practices and even encouraged them, as the Washington Post illustrates with the story of one Wells Fargo salesman:
Ricky Hansen Jr., who worked for several years as a manager at Wells Fargo branches in Arizona, said in court documents he witnessed sales tactics “that started out okay but then evolved into massive fraud.” Hansen said he discovered that one employee was opening 40 to 50 bank accounts under fake names every week, and funding those accounts by transferring other customers’ money. The employee later moved the funds back, after he’d received credit for the sales, hoping the customers didn’t notice. Hansen added that customer signatures on bank records appear to have been written by the same person using the same pen. Still, the employee was praised by upper management, Hansen said. When he reported to the bank manager what he knew, he was told the employees’ sales were legitimate. "You have to decide if you want a job here. You can either run with us or not,” Hansen recalled his district manager telling him, according to court records. “Play ball or get out.” Hansen was later fired, while the employee he reported was promoted, he said.
It is incredible to think that during most of the 15 years that this unethical and criminal activity was going on Wells Fargo was considered one of the best run banks in the US. Their balance sheet was in such good shape that they tried to refuse to take TARP money at the height of the financial crisis. Since the financial crash, we have learned about the mortgage and foreclosure fraud, the price-fixing of interest and currency rates, massive anti-money laundering violations, and much more. But, looking at the breadth and depth of this scandal, you can only wonder what other criminal and unethical behavior was going in the banking industry that we still don't know about.
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