In September 2016, Wells Fargo, a bank with its head office in San Francisco, California came under fire for a huge scandal, which involved accusations of fraudulent sales practices. Employees of the bank opened around 3.2 million fake accounts due to the fact that the culture at Wells Fargo put a lot of pressure onto its employees to reach unrealistic sales goals, causing some employees to even break the law. Since the scandal broke out, the bank has relieved about 5,300 employees due to their illegal behavior and has also gotten rid of the extreme sales goals. The bank was also investigated by Federal prosecutors and Congressional overseers and California, Illinois and Chicago have all put their business partnership with the bank on hold since the event.
The scandal that arose involved the employees at Wells Fargo. They fraudulently opened credit card and bank accounts, transferred money between the accounts and created fake email addresses, which they used to sign customers up to the bank’s accounts. This cross- selling activity all occurred without the customers’ knowledge and consent and was, therefore, fraudulent, abusive, secretive and illegal. In addition, debit cards and PIN numbers were issued and created, again without the customers’ consent.
Over a period of five years, millions of fake accounts were opened on behalf of customers. The investigation into Wells Fargo stunningly revealed that its employees had been engaging in these illegal activities for 14 years. This raises stark questions, particularly about the leadership at the bank, but also about potential whistleblowers who have or may have wanted to speak out about what was occurring.
Senior Leadership
The executive team and the board of directors were very slow in reacting and grasping the full extent of the situation at Wells Fargo despite receiving very clear and repeated warnings. According to the former chairman and CEO of the bank, John Stumpf, his testimony revealed that a board of committee became aware of the situation in 2011. However, even though employees continued to be fired since the fraud, the board only began to take “serious action” in 2015.
Stumpf claimed that he became aware of the incident in 2013, two years after the business unit was unable to come up with any feasible, effective solutions. However, it was only until 2015 when Stumpf took action and called upon consultants to look into the effect and impact the fraud left on consumers. The investigation into the scandal uncovered that the reason it took so long to garner any reaction was because of the comments Stumpf made in regard to the leadership team and how they simply refused to believe that the fraud could be that systemic in the bank’s culture.
Members of the executive team, some of who have spent many years at the bank, believed that the fraud was a result of a few minor isolated cases. During the Congressional hearings, Stumpf attempted to rationalise the incident by stating that it occurred because of bad actors and that it was a part of doing business, rather than believing that it was a systemic failure.
Moreover, the senior leadership proved to severely underestimate the harm done to customers. Stumpf stated that initially the bank did not realise that consumers could be charged fees for the fake accounts. This statement indirectly implies that the only harm done to consumers was monetary. It seems that the leadership team was so focused on the financial damages that they simply failed to see the ethical damage.
The leadership’s attempts at downplaying the gravity and impact of the fraud could help explain why it took so long for any action to be taken and to penalising the executive members after the scandal arose. Even now, Stumpf still holds Wells Fargo’s culture in very high regards despite all the evidence pointing to the contrary.
Whistleblowers
Not only has the scandal undoubtedly uncovered blind spots in the bank’s senior leadership, but it also seems that some of the warnings never came to light. Investigations have shown that the bank has ignored, deterred and even fired some employees who tried to speak out about the culture and the high pressure and intimidation they received from managers.
In some cases, employees stated that they were fired after reporting violations or for attempting to warn their supervisors to the illegal behavior. Some concerns brought up by employees were also ignored, which included an email sent directly to Stumpf and a petition that garnered 5,000 signatures by colleagues that sought to fight back against the unethical behavior. Stumpf has called the firing of whistleblowers “regrettable” and has stated that the bank has a non-retaliation policy against those that seek to voice their opinions and concerns.
Since the financial crisis in 2008, regulators have drawn attention to the importance of forming a strong banking culture that encourages people to ask questions or raise concerns without fearing any backlash. It is clear that Wells Fargo does not set a good example of such a culture as employees were either simply ignored or fired for speaking up.
