Wells Fargo Whistleblowers – Everything You Need to Know
[This post was originally written in August 2018. There have been so many subsequent scandals at Wells Fargo along with our own historic win on behalf of Wells Fargo employees. It has been rewritten and reposted in January 2020.]
Ahhh, Wells Fargo (or Hells’ Cargo as it is affectionately known in the office.) How can a company be so inept? Scandal after scandal after scandal. This time, regulators are demanding answers about why the company wrongfully foreclosed on hundreds of homes. Entire families displaced and put on the streets.
What does Wells Fargo have to say? “We want to satisfy our customers’ financial needs and help them succeed financially. This unites us around a simple premise: Customers can be better served when they have a relationship with a trusted provider that knows them well, provides reliable guidance, and can serve their full range of financial needs.”
Somehow tens of thousands of families don’t think Wells Fargo is their “trusted provider.”
In this post we will look at several recent scandals, Wells Fargo whistleblower retaliation victories and where we need your help!
Wells Fargo – A Decade of Scandals
We first started writing about Wells Fargo about 10 years ago. That was right after the infamous financial meltdown in 2008. Some of the topics we covered are as follows:
Wells Fargo agreed to buy back $1.4 billion in securities after being accused by the California Attorney General of defrauding investors. Pre 2009 even a dog could get a mortgage and Wells Fargo knew that many of the loans they were writing were risky. Yet they packaged those loans and sold them to investors with promises of high returns and liquidity. In other words, they figured out a way to profit on both ends of the transaction and left investors and homeowners holding the bag.
Said California Attorney General Edmund Brown Jr., “Wells Fargo convinced thousands of investors to purchase auction-rate securities with promises of robust returns and liquidity, but when the market collapsed, investors were left out in the cold. Based on misleading advice, investors bought these risky securities. Now, retail investors and small businesses are finally getting their money back.”
The bank agreed with the U.S. Department of Justice that Wachovia Bank (Wells Fargo acquired Wachovia) failed to report suspected money laundering by drug traffickers that used the bank. The government says the laundered money was used to purchase 4 planes that would later ship 22 tons of cocaine. According to Business Insider, Wachovia “moved $378.4 billion from powerful drug cartels into currency exchange houses in Mexico. That’s one-third of Mexico’s annual GDP.”
A New York federal judge fines the bank for overdraft practices that he said “gouged” consumers.
The Financial Industry Regulatory Authority (FINRA) fined Wells Fargo for not sending disclosure documents to mutual fund customers and for delays in reporting complaints involving their brokerage employees.
Wells paid a $16 million fine for violating the Americans with Disabilities Act. The Justice Department said that Wells Fargo would direct deaf customers to a dedicated TTY/TDD line that went unanswered. Messages left on the system wouldn’t be returned. [The company had denied liability but did say that they put “stickers” on company phones reminding employees of their obligations to the hearing impaired.]
The bank pays $125 million after being sued by a group of pension funds over the quality of mortgage backed securities. Once again the bank paid the fine without admitting any wrongdoing.
The Federal Reserve fined Wells Fargo $85 million for steering highly qualified borrowers into subprime loans. The bank was also fined for falsifying income figures on loan applications. Since most residential mortgages are backed by the federal government, the financial burden of bad loans ultimately falls on the shoulders of taxpayers – another “bailout” for the bank.
In addition to the fine, the bank agreed to improve its compliance programs and its incentive compensation programs. (Apparently, the folks in charge of creating 2 million phony accounts didn’t understand that you shouldn’t pay bonuses based on the number of phony accounts created.)
The bank pays $37 million to settle claims that it and other banks were rigging bidding competitions for municipal bond offerings.
FINRA fines the bank another $4 million for additional securities violations.
Wells Fargo was one of five large mortgage servicers that agreed to pay a total of $25 billion to settle claims of wrongful foreclosures. Wells Fargo’s share was $5.35 billion.
One year later, the New York Attorney General sues after claiming the state received a “significant number of complaints regarding…flagrant violations” of the settlement.
Wells Fargo agrees to pay $175 million to settle Justice Department charges of discrimination against African American and Hispanic borrowers. Prosecutors said these borrowers “were steered into subprime mortgages” or “paid higher fees and rates than white borrowers because of their race or national origin”.
The bank agrees to pay $6.5 million to settle SEC charges.
Less than one year after agreeing to pay $5.35 billion to settle foreclosure abuse claims as part of the National Mortgage Settlement, Wells Fargo and nine other lenders agree to pay $8.5 billion to settle additional foreclosure abuse claims. This time the Office of the Comptroller of the Currency and the Federal Reserve brought the charges.
The banks paid $203 million to settle a class action lawsuit concerning excessive overdraft fees.
Wells Fargo settles another class action lawsuit, this one brought on behalf of 24,000 Florida homeowners who claim they were overcharged for force placed insurance.
When the banks accepted billions of dollars in bailout monies, they agreed to help struggling homeowners who found themselves underwater. Instead of helping these borrowers, the bank participated in a scheme to overcharge the most vulnerable group of homeowners for property insurance.
The bank agrees to pay $42 million to settle claims brought by the National Fair Housing Alliance. The nonprofit advocacy group neglected the maintenance and marketing of foreclosed homes in black and Hispanic neighborhoods, Neglected homes attract crime and depress property values making it harder for those communities to recover.
Freddie Mac gets in the act. The bank agrees to pay $839 million to repurchase homes that were financed by the bank. Freddie Mac claimed the bank violated underwriting guidelines and tricked the agency as to the quality of the loans.
FINRA fines the bank’s securities arm… again. This time the fine was $4 million.
A bank affiliate pays $4 million to resolve alleged violations of New York’s credit card laws.
The SEC claims that Wells Fargo misled investors as lead underwriter in a failed $75 million bond offering. The agency also charged a senior banker at Wells with aiding and abetting the fraud.
Another billion dollars fine, $1.2 billion to be precise. This one from HUD. The charges were brought after the government claimed that taxpayers were left holding the bag on thousands of bad mortgage loans written by the bank.
The CFPB fines the bank $3.6 million for illegal student loan practices. The bank also agrees to pay restitution to students hurt by their actions.
The infamous 2 million phony account scandal and $185 million in penalties. The agencies leading the charge this time are the CFPB, the Comptroller of the Currency and the City and Counties of Los Angeles.
Wells Fargo agrees to pay $50 million to settle a racketeering lawsuit accusing the bank of overcharging tens of thousands of homeowners for appraisals.
Wells Fargo agrees to pay millions in a class action lawsuit filed on behalf of an estimated 1.1 million borrowers. Homeowners claimed the bank continue to charge interest on FHA mortgage loans even after the principal had been paid.
Several states joined together and recovered $575 million nationwide settlement with Wells Fargo because of the bank’s systematic misconduct exploiting its own customers. Wells Fargo admitted opening millions of deposit, credit card, and other accounts without customer authorization.
A group of former Wells Fargo executives agreed to pay $58 million in fines over their roles in various bank scandals including the infamous opening of accounts without client consent. Former CEO John Stumpf paid $17.5 million and is barred from the industry. We are thrilled that regulators are finally going after those responsible for these scams. (For many banks, billion dollar fines are nothing more than a cost of doing business. The only thing better than fining the executives would be to see a few of them do the “perp walk” on the 5 o’clock news.)
Many would be Wells Fargo whistleblowers are reading this and saying, “What about…” We know. According to the Violation Tracker website, Wells Fargo has been fined or penalized 136 times and paid $17,296,835,949 between 2002 and December 2019. Not one other bank can say that (not that any would want to).
OSHA Retaliation Victory Great News for Wells Fargo Whistleblowers
Many of the cases against Wells Fargo came courtesy of Wells Fargo whistleblowers. Brave women and men tired of the freed and toxic corporate culture.
The largest anti-retaliation reward to date by the Department of Labor in a Sarbanes-Oxley whistleblower went to a Wells Fargo whistleblower. The bank was ordered to pay $5.4 million to a bank manager who fired for blowing the whistle on fraud by two co-workers. The damages were so high because the ex-employee claimed he was effectively black listed from the banking industry.
Like most whistleblowers we have represented, this manager first reported the misconduct internally to Well’s Fargo ethics hotline. And like many whistleblowers, he soon found out that ethics hotlines are an express ticket to termination.
But apparently this whistleblower’s experience in contacting the hotline suggests that doing so was not a good career move.
Wells Fargo whistleblowers are entitled to a wide variety of anti-retaliation laws. Under Sarbanes – Oxley, whistleblowers are protected against reporting conduct they reasonably believe violates federal bank fraud or other laws. The federal False Claims Act protects whistleblowers if the bank’s conduct involved federal programs or funds (residential mortgage servicing and underwriting are prime examples.) The SEC also has anti-retaliation provisions as do most states.
These laws typically provide for reinstatement or lost wages (including future lost wages), emotional distress, damages to reputation and legal fees. Some states allow punitive damages.
Mahany Law Files Overtime Class Action on Behalf of Wells Fargo Bankers
Shortly after the phony account scandal broke we were contacted by several bank employees. We were one of the consortium of firms prosecuting unpaid overtime claims on behalf of bank employees. That case was settled for $35 million in 2019.
The bank’s response? “Wells Fargo has a long-standing commitment to compensating our team members fairly and in accordance with all federal and state laws.”
We are proud to have helped hundreds of bank workers and their families.
Mortgage Modification Wrongful Foreclosure Scandal
[Mahany Law 2018 Investigation] Buried in a recent regulatory filing was a disclosure that for a five year period, a computer glitch caused “certain accounts” to be improperly denied a mortgage modification. The bank is setting aside $8 million to compensate those families. In our opinion, $8 million isn’t enough to compensate a single family whose home was taken from them.
It’s not like the bank can give their houses back. Cherished childhood memories gone. And all because the bank made another mistake. But who is responsible for those mistakes, it is certainly not the rank and file employees (although they are the ones taking the flack).
Assuming that the bank is correct and only 400 homes were wrongfully taken, $8 million comes out to be $20,000 per homeowner. Where can you buy a home for $20,000? In most markets, that is not enough for a down payment. And who will loan money to someone who just went through a foreclosure?
The credit scores of those folks are ruined. Bankruptcy? That could hurt someone’s employment chances. Pulling kids out of school and moving them mid-semester? How do you compensate for that?
We believe that Wells Fargo simply hopes that most down-on-their-luck former homeowners won’t find lawyers and won’t sue.
Another thing that bothers us is that Wells Fargo has been silent on what efforts they are making to find these affected homeowners. Assuming the bank can even identify them.
The banks claims that approximately 400 people have lost their home. We think the number is in the tens of thousands. How do we know?
We have spoken with hundreds of borrowers who tried to navigate through the mortgage modification process. Most claim they were forced to resubmit the same paperwork over and over. Along the way, many just gave up.
Thousands just walked away from their home. They spent every dollar they had on fighting the bank. A bank that has almost two TRILLION dollars in assets. As one former homeowner said to us, “there are bank robbers and then there are ‘robbery banks.’”
Many clients have told us that they were instructed to skip three payments so they could qualify for a modification. They did so, qualified for a modification, made the trial payments yet still lost their home.
This latest scandal involves faulty loan modifications. But this time isn’t Wells Fargo’s first time at the rip off rodeo. Just five weeks ago, the bank was accused of using complex financial investments to rip off mom and pop investors.
And who can forget the fiasco over millions of accounts opened without their customers’ permission? Repossessing cars?? The list goes on and on.
Unfortunately, Wells Fargo has become such a joke that you almost know that any news story that begins with the words “Wells Fargo” is going to end badly!
Wells Fargo Whistleblowers
Despite the wake of destruction that Wells Fargo has left behind, the rank and file people who work there are wonderful. Hard working, concerned… and unfortunately, powerless to fix things.
While the class lawyers are lining up to help the latest round of victims, we are looking for Wells Fargo whistleblowers.
The best way to fix things at Wells Fargo is by breaking up the bank. Senior management is too diseased and the corporate culture too far gone. Unfortunately, many folks in Congress don’t have the stomach to take on America’s third largest bank. There really is something to that slogan, “Too big to fail.”
[One ray of sunshine… in February, the Federal Reserve ordered that Wells Fargo can’t grow its asset base until it “fixes” its problems. But what does “fix” mean and how serious is the Fed?]
If Congress won’t break up the bank just yet, the next best strategy is empowering rank and file employees to fix things. And Congress did just that by passage of the Financial Institutions Reform, Recovery and Enforcement Act. FIRREA for short.
That law empowers Wells Fargo whistleblowers to report misconduct by the bank and receive rewards of up to $1.6 million. If we can build an SEC whistleblower case, there is no limit on the size of the reward. [The False Claims Act also has uncapped awards in residential mortgage fraud cases, however, the current leadership at HUD has not been actively using the Act or paying whistleblowers.]
Why file for an award?
First, under a 2018 United States Supreme Court case, workers no longer are protected by the anti-retaliation provisions of Dodd-Frank unless they file with the SEC. Calling a company’s ethics hotline doesn’t protect you. Instead, it could get you FIRED.
Second, filed whistleblower cases have a much stronger chance of getting investigated and prosecuted. They go to the front of the line.
Third, is knowing that you made a difference in stopping greed and corruption.
And finally, there are the awards. Multimillion dollar rewards are possible but only of you file. (And usually that also means being the first to file.)
Two Bank of America whistleblowers made a combined recovery in excess of $100,000,000.00. When big banks engage in big wrongdoing, big rewards are possible.
We speak with bank whistleblowers every day. Unfortunately, after a two decades, 136 fines and over $17 billion in penalties, we don’t think the bank has learned its lesson yet. And that means plenty more opportunities for Wells Fargo whistleblowers.
Political winds change constantly but even the bank’s staunchest political allies are unable to continue to fix Charles Scharf’s messes.
Wells Fargo Whistleblowers – The Time Is Now
If you have inside information of wrongdoing involving a bank or financial services company, call us. For more information please visit our FIRREA whistleblower information page. Ready to see if you qualify for an award? Contact us online, by email or by phone at (414) 704-6731. All inquiries are protected by the attorney – client privilege and kept strictly confidential.
And now for our Wells Fargo whistleblowers and would-be whistleblowers, an 8 minute segment from the CBS show The Whistleblower.