Wells Fargo is in the news again. America’s third largest, $1.8 trillion bank must pay $185 million in fines and penalties for opening millions of credit card and bank accounts without their customer’s consent. And what did Wells Fargo have to say for its latest bad behavior? In a prepared statement the company said, “We regret and take responsibility for any instances where customers may have received a product that they did not request.”
What “unwanted products” did these customers receive? The Consumer Financial Protection Bureau (CFPB) says as many as 1.5 million deposit accounts. Wells Fargo employees also submitted applications to open 565,433 credit cards and all without the consent or knowledge of the applicants.
By moving money around and submitting phony credit applications, Wells Fargo generated millions more in overdraft charges and interest penalties. Not only did customers receive these unwanted charges, there is little doubt that many customers saw their credit scores drop. These days, good credit is necessary to get the best rates on insurance, car loans and mortgage. Have a bad credit score and you may even be turned down for some insurance and financial products.
As a species, humans are predators. And the most aggressive predators seem to work for America’s “too big to fail” banks.
Wells Fargo has tried to do some damage control by issuing the pathetic apology above and by firing 5,300 employees that engaged in these criminal antics. One notable exception, however, is the woman in charge of the division where the crimes took placee. Carrie Tolstedt, senior vice president for community banking, is being allowed to retire. She is taking with her a “small” severance of $124.6 million. Worse, while the fraud was taking place she was earning yearly bonuses of $5 million according to NPR.
Did Wells Fargo condemn Tolstedt for her role in the breathtaking scam? No, the bank’s CEO John Stumpf at her retirement called her a “dear friend,” “role model” and “standard-bearer for our culture.”
This post is being written from the Mayflower Hotel in Washington D.C. Currently the national whistleblower lawyer bar is meeting here. Wells Fargo is certainly on everyone’s mind here as well as growing cry that corporate officers responsible for fraudulent activities lose all bonuses and severance entitlement. The “C-Suite Mafia” as I call them, will never agree to these reforms, of course.
We are certainly happy that the government has taken action against the bank. Unfortunately, it is the rank and file workers bearing the brunt of the mass terminations. They should have consequences but big banks must do far more to change the culture of the bank. How could that be done? Going after the executives who encouraged this behavior or created an environment where it could thrive would be a great place to start.
By the numbers, Wells Fargo must pay a total of $185 million. Several regulators took action against Wells Fargo for its misbehavior. Of the total fines and penalties, $100 million goes to the CFPB, $50 million to the City of Los Angeles and $35 million to the Office of the Comptroller of the Currency.
In announcing the penalty, CFPB Director Richard Cordray said, “Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses. Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed. Today’s action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences.”
Los Angeles City Attorney Matt Feuer was blunter in his criticism of the bank. In an L.A. Times article, Feuer said, “It’s outrageous for a bank to use a customer’s private information without permission to open an unwanted account. Customers must be able to trust their banks.” He also said the bank “victimized their customers by using pernicious and often illegal sales tactics,” and that the bank established a sales quota system that drove “bankers to engage in fraudulent behavior.”
Whistleblower Awards for Banking Violations
How did 5,500 employees participate in this scheme without anyone stepped forward for years? The answer to this question is complex. Most workers don’t want to make waves. They simply want to do their jobs and go home at night. Except for compliance officers, the average bank worker’s job description doesn’t include ferreting out fraud and reporting superiors and co-workers.
Workers also fear retaliation as well.
A little known law, the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), pays whistleblower awards of up to $1.6 million. Insiders with information about fraud that threatens the stability of the bank or depositors can receive an award for their information.
Unlike traditional whistleblower cases under the False Claims Act, there need not be any loss to the government. A bank’s own misbehavior is enough if that misbehavior or fraud threatens the financial stability of the bank. Since huge fines have an impact on the bank, most misbehavior could be the basis for a FIRREA prosecution and award.
Administered by the Department of Justice, we like FIRREA because whistleblowers are often able to remain anonymous and not have their identity disclosed.
MahanyLaw – America’s FIRREA and Bank Whistleblower Lawyers
As one of the nation’s most successful whistleblower firms, we handle all types of whistleblower claims… Medicare fraud, defense contractor overbilling, state Medicaid fraud, IRS, SEC, etc. Our bread and butter, however, are banking cases. Since 2014 we have helped our bank and mortgage company whistleblower clients receive over $100 million in awards.
Interested in learning more or finding out if you qualify for a FIRREA award? Give us a call. We never charge for our services unless you receive money and all inquiries are confidential and protected by the attorney – client privilege.
For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct).
MahanyLaw – Proudly Representing Whistleblowers Around the World