Wells Fargo Fraud Goes Back To 2005

I think we are all shocked (NOT!) to learn that the massive fraud at Wells Fargo was occurring as far back as 2005. That means the firm was engaging in these illegal activities for a decade before they were caught and stopped. The report in the NY Times today documents how employees raised red flags about the illegal behavior for years and for years those employees were either ignored or even fired. These ethical employees reported the abuses to HR, to the company’s anonymous ethical hotline, to their managers and supervisors, and a few even wrote letters to CEO John Stumpf himself.
The report also indicates that many of the whistleblowers were subsequently fired for a variety of reasons many of which show a clear indication that the company was looking for an excuse to terminate them. In one especially egregious case, a whistleblower called HR about the ongoing fraud, where he was directed to the ethics hotline. When he called the ethics hotline, he was asked to provide specific information which he did by looking up and reporting the fraudulent accounts. A short time later, he was fired for reviewing accounts without authorization.

CEO Stumpf at first tried to blame the employees for the massive fraud and then testified in front of Congress that senior management only became aware of the situation in 2013. According to the bank, the ethics hotline responded to cases individually and was not set up to discover any systematic patterns in the cases they were asked to investigate. If you believe that, I also have a bridge to sell you. It’s clear that executives willingly turned a blind eye to what was going on purely to boost the bottom line, boost the share price, and line their own pockets.

Unfortunately, we all know how this will end – Stumpf will be replaced, the bank will pay even more fines and settle lawsuits that barely put a dent in its bottom line, and it will be back to business as usual. At the congressional hearing Democrat Mike Capuano asked Stumpf, “What’s the difference between you and a bank robber?” The answer, of course, is there is no difference. What will it take to give some of these senior executives at the fraudulent companies some serious jail time…

Update: I guess the New York Times article was the last straw as Stumpf has resigned effective immediately. Is jail his next stop?