Wells Fargo v. Whistleblowers: Big Bank Fraud Strikes Again

The plight of the Wells Fargo whistleblowers is a tale as old as time. The bank’s employees were pressured to commit fraud at work. Some of them reported those fraudulent practices to Human Resources or an ethics hotline. Those employees were fired.

Sadly, this is the story of many whistleblowers and the corporations they work for. It’s why pro-whistleblower, anti-fraud laws like the False Claims Act and Dodd-Frank are so important. Retaliating against employees that truthfully report fraud is plainly illegal. Yet, as evidenced by the Wells Fargo scandal, it is still a startlingly common practice.

The Wells Fargo fake accounts scandal

Like many corporate fraud schemes, the one Wells Fargo perpetrated had become a pervasive business practice by the time it was revealed. The company has since claimed that only 1% of its employees were found to have engaged in fraudulent practices. However, in such a large company, 1% of employees could potentially amount to quite a lot of people.

It certainly did in this case, based on the number of employees fired for ethics violations since the fraud was discovered: 5,300. Throughout the duration of this scam, Wells Fargo opened an estimated 2 million fake accounts without the knowledge or consent of its customers.

According to both the employees that participated in the fraud and those that refused to, the violations were not anomalies committed by a few bad seeds. They were the direct result of completely unrealistic sales pressure, which trickled all the way down from the top.

Now-resigned CEO John Stumpf allegedly wanted every Wells Fargo customer to be enrolled in eight Wells Fargo products, including checking accounts, credit cards, and home and auto loans.

Former employees have shared that managers would publicly embarrass tellers that fell short of those unrealistic sales goals.

It also appears that employees who refused to participate in the fraud were forced to explain why they weren’t being “team players.”

Those that dared to call an anonymous ethics line or report the fraud to Human Resources were allegedly fired for their honesty, in some cases after being bullied, demoted, or otherwise harassed.

FRAUD IN THE FINANCIAL SECTOR: READ MORE

It’s not hard to imagine, then, why someone would feel they had to participate in the fraud. Former employees have since told reporters that they knew what they were doing was wrong, that they could not meet their sales quotas without committing fraud, and that they experienced debilitating anxiety and panic attacks as a result.

One former bank teller even reported developing an addiction to hand sanitizer as a means to calm her nerves before speaking with a customer, because she felt pressure to commit fraud just to keep her job.

Banking practices have already been under scrutiny since the financial meltdown in 2008, so the willingness of Wells Fargo management to knowingly abuse consumer trust is unsettling, to say the least.

Checking customers were charged fees on accounts they didn’t even know they had. Customers that didn’t want online banking services were allegedly coerced into signing up for these services.

In addition, customers with few assets, poor credit, or otherwise difficult economic circumstances were reportedly given bad financial advice in service of those unrealistic sales goals. Elderly consumers and those who spoke little English may have been particular targets of the scheme.

The problem with internal reporting

Most employees would rather have their employers stop committing fraud than face the risks and uncertainty of blowing the whistle. Unfortunately, many organizations have a bad habit of implementing superficial internal reporting systems under the guise of encouraging transparency.

Rather than acknowledging and rewarding transparency, they instead punish people for utilizing the very systems that are supposed to be protective against retaliation.

Instituting an ethics tip line and then specifically targeting and firing employees for using it, as Wells Fargo has been accused of doing, is not a great way to avoid being sued by the government. It’s a great way to appear even guiltier when you are forced to explain fraud allegations.

Will the fraud ever stop?

Companies like Wells Fargo get away with fraud again and again because they can. They make a lot of money, they have a lot of influence, and they set aside funds for settlements and fines because they expect to get in trouble. They also expect that after committing fraud and being fined for it, they will be able to continue with business as usual.

It is only when their bottom line and reputation are severely impacted that they may start to seriously reconsider murky business practices.

Though the company is clearly still in business, new account openings have reportedly dropped 44% in the wake of this scandal. In addition, Wells Fargo was ordered to pay a record fine of $100 million to the Consumer Finance Protection Bureau and another $85 million to the Office of the Comptroller of the Currency and to the county and city of Los Angeles. The bank will also issue refunds to the customers defrauded in the scheme.

It is more than fair that companies that break customers’ trust should be held accountable financially. Consumers can encourage corporate reform, too, when they refuse to give their business to companies that have a cavalier attitude about committing fraud.

Learn more about fraud in the financial sector and the laws that make retaliating against whistleblowers illegal.