Massive Fraud At Wells Fargo Is Just More Criminal Wall Street Conduct
It is hard to go a day without reading about another corporate criminal caught in the act – what are they teaching these people in business schools these days? Yesterday’s huge story is about the massive fraud committed on a firm-wide basis at Wells Fargo. Wells Fargo employees apparently set up millions of unauthorized bank and credit card accounts since 2011 in an attempt to boost fees and rack up sales figures to earn more money. Employees would set up phony accounts linked to existing accounts, even creating bogus PINs and email addresses for those accounts. Those new accounts would count toward the employee’s sales targets, earning them bonuses. But on top of that, the employees then illegally and without authorization transferred money from the valid original account into the newly opened account. This caused the valid account to be overdrawn and then be charged for insufficient funds by the bank. An estimated 1.5 million of these bogus accounts were opened up at the bank in the last 5 years. In addition, employees opened up over half a million credit card accounts without the customer’s knowledge or approval. These cards racked up over $400,000 in various fees as well. Wells Fargo states that over 5,300 employees were fired over the last few year for improper behavior. And it is clear that these illegal actions were widespread throughout the company. It is impossible to believe that levels of senior management could not have been aware of the problem. It also brings into question the whole account opening procedures and protocols at the bank which are subject to strict anti-money laundering (AML) rules. The unauthorized transfers of funds is also a clear violation of securities law. Wells Fargo has been ordered to pay $185 million in fines and restitution by the CFPB. Wells Fargo net income for the second quarter of this year slumped to around $5.5 billion just to show you how pathetic this fine is, despite it being the largest fine the CFPB has ever levied.
In my experience on Wall Street, the violations here are egregious – violating AML rules and moving customer money without authorization. But it was apparently business-as-usual at Wells Fargo. It is becoming more and more apparent that many of these large financial firms are in many ways ongoing criminal enterprises. How long must this go on before we either create serious enough punishment for all levels of management when this illegality occurs or simply force the institution to close down.