Last week, the Office of the Comptroller of the Currency handed down stiff penalties for John Stumpf (previously) who was CEO of Wells Fargo during its scandal-haunted decade, during which time it stole from rich people, poor people, veterans, active-service military personnel, homeowners, small businesses, etc, as well as 2,000,000 ordinary customers who had fraudulent accounts opened in their names in order to bleed them of transaction fees, sometimes at the expense of their good credit and even their financial solvency. Under the deal, Stumpf will have to pay $17.5m in fines and cannot ever work in finance again (don’t worry, he’s still a multi-multi-multi millionaire).
The OCC didn’t just penalize Stumpf: it has pending cases against most of Wells Fargo’s C-suite during the relevant years, and it has published a 100-page report on its investigations, including first-person accounts from bank personnel who were pressured to commit fraud on penalty of losing their jobs and having their names fraudulently entered into an industry-wide blacklist of bank employees who had been caught committing illegal acts.
The report reveals both the incredible toll this took on those employees (“I was in the 1991 Gulf War. … I had less stress in the 1991 Gulf War than working for Wells Fargo”) and the clanging bells and flashing red lights that Stumpf and Carrie Tolstedt (previously), another disgraced former Wells Fargo exec, roundly ignored.
These warning signs were pretty incredible: after one presentation by Tolstedt downplaying the seriousness of the rot in the bank, a board member cursed her out, calling her reassurances “a piece of shit.”
Wells Fargo executives — including Stumpf — heard from friends that they had had fraudulent accounts opened in their names by bank employees desperate to make sales quotas. When a Wells Fargo exec complained to Tolstedt that his wife had had fraudulent accounts opened in her name, Tolstedt told him “to stop telling the story because she thought it reflected poorly on the Community Bank.”
Starting in 2012, the OCC says, the bank began monitoring the sales force for misconduct. But it designed the monitoring to minimize its findings and looked only for certain misdeeds, avoiding numerous other red flags of unauthorized account-opening.“Employees were referred for investigation only if they engaged in sales practices misconduct so frequently” that they ranked as the “top 0.01% or 0.05% of total offenders.” That meant that although 30,000 employees per month exhibited suspect activity, only as few as three per month were investigated.
At one point, security officials opened a few undercover accounts not tied to real customers to ferret out misconduct. Within 24 hours of the accounts being opened, two sales employees ordered debit cards for the customers, claiming they had spoken to the customers directly.
Column: That Wells Fargo accounts scandal was even worse than you can imagine [Michael Hiltzik/LA Times]
(via Naked Capitalism)