Author Topic: Wells Fargo ~5300 member class action upcoming?  (Read 7145 times)

DonaldD

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Wells Fargo ~5300 member class action upcoming?
« on: September 21, 2016, 03:06:35 PM »
http://money.cnn.com/2016/09/21/investing/wells-fargo-fired-workers-retaliation-fake-accounts/index.html

So, Wells Fargo fires 5300 "low level"employees for the whole fake accounts/fake charges sales scam - but then, it looks like at least some of those employees who actually did refuse to go along to get along, and who did report the illegal/unethical practices they were being directed to undertake, were fired for reporting the abuse (or so they claim).

I don't see WF CEO John Stumph surviving the month at the company...

Fenring

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #1 on: September 21, 2016, 03:18:46 PM »
Guess how many people will go to jail over this? Hint: the number can be counted on zero hands.

NobleHunter

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #2 on: September 21, 2016, 03:32:52 PM »
So how do we react to this kind of malfeasance? Sure, fire the people who deserve if but 5300 people (and especially retaliation against whistleblowers) implies there are problems all the way up. It seems likely that some higher level of management contributed to the problem without actually having done anything criminal or even directly unethical. Assuming a major factor was excessive demands on employee performance (which seems to be common in companies with widespread fraud or corruption), punishing those on high seems reasonable. However, I don't know if there's a good way to define that X level of aggressive goals for front-line and sales management will result in widespread misconduct but Y level is still okay. That makes me twitchy about smacking around the corporate executives. Willful blindness and exclamations about troublesome priests aside, I'm not sure if it's just to hold the highest levels of management responsible for the actions of people who are lying to them.

Looking more to collective responsibility, if a company culture is this toxic, could we just liquidate the company? Corporate capital punishment, as it were. At the very least, it would change the risk/reward calculation of shareholders for having insane sales targets.

Fenring, I thought people had gone to jail for similar malfeasance. Though my source was an article claiming that jail sentences aren't seeming to deter execs from the kind of behaviors that result in this kind company-wide fraud or corruption.

Fenring

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #3 on: September 21, 2016, 03:46:08 PM »
Fenring, I thought people had gone to jail for similar malfeasance. Though my source was an article claiming that jail sentences aren't seeming to deter execs from the kind of behaviors that result in this kind company-wide fraud or corruption.

Oh, my comment was more a prediction than anything else. Based on the recent track record of HSBC getting off with nothing but a fine, and various banks getting the same as a result of 2008, I don't expect any criminal prosecutions here. This isn't Iceland, after all :)

TheDrake

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #4 on: September 21, 2016, 05:06:44 PM »
I think crucial to the discussion are the following points:

1. Did management know about the practices?
2. Was management negligent in not monitoring activity sufficiently?
3. Did management set the proper tone and training about fraud?
4. Did people actually get fired for balking at committing fraud?

I say this as a former investor in WFC and a current depositor, strongly considering my continued relationship with the company. From what I've read so far:

1. Yes, Fargo admitted they knew it was happening for years.
2. They claimed taking steps to stop the practice, but appear to be miserably bad at it.
3. Unclear.
4. Unclear.

There's this whole notion of aggressive goals being the root of the problem. I have certainly seen businesses pull shady or illegal crap to meet their goals. But to me, this is like a professional baseball team demanding more home runs from a player, and then they take PED. Management clearly takes a stand against that, does its best to root it out (for sake of argument). Is the Yankees front office to blame for A-Rod?

To me, it is the customers and stockholders that should hold management accountable, not the government - at least with respect to individuals in executive position. If we are going to start making unrealistic sales quotas illegal, then we're going to have to make a lot more room in the jails.

The oversight question is the hardest one to understand. It seems they should have easily been able to mine data to identify accounts with no activity (checking accounts not receiving deposits or making payments, credit cards opened but never used) - and then contact the account holder to determine if it was fraudulent. Not doing that once they knew there was an issue seems negligent to me.

PSA addendum - if you don't yet have a credit monitoring service, get one now. You should always know when a new account is opened in your name.

DonaldD

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #5 on: September 22, 2016, 11:30:14 AM »
As NH pointed out - 5300 people fired for the same types of practices is very suspicious.  Is it likely that those 5300 people all or primarily figured out the loopholes (creating false email account, opening fraudulent accounts, etc) independently?  Ehhh... no.

Then you're left with a conspiracy of 5300 people.  The likelihood of a conspiracy of 10 people being kept from their immediate management is slim.  The likelihood of a conspiracy of 5300 people being kept from even the executive management team is vanishingly small.

At some point, the management team, seeing this trend, should have not just put in place a policy to address the pattern of fraud, but should have actively, aggressively followed through on the policy, including terminations of management personnel under whom the fraud was 'allowed' to proliferate.  If those policies cannot be shown to have been implemented after evidence of the generalized fraud became known (including actual implementation of those policies, including the public termination of management while making the rationale public) then I actually think that prison time would be reasonable (although highly unlikely to occur in the current environment).

Seriati

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #6 on: September 22, 2016, 11:46:24 AM »
Except, DonaldD, it's not a conspiracy among 5300 people.  If you ask all your employees if they've violated the employee handbook and fire those that say yes, how many of them would independently come up with the idea that they should lie and say no?  If you set a sales quota that can not legitimately be met, and fire people that don't meet it, it doesn't take a conspiracy for thousands of them to find the same "solution."

Unreasonable management goals should get looked at a lot harder.  I can't tell you the number of times a manager's career and compensation are based on observable metrics (ie increase sales, decrease costs) without any regard to whether the metrics are even achievable in a given set of circumstances.  Particularly for large entities, and especially large banks, there's no value on producing the best result that you could have, but only on showing the largest margin.

Fenring

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #7 on: September 22, 2016, 12:23:37 PM »
Just FYI, I've read accounts from former Well's Fargo employees, and the management clearly knew about the scam and were almost certainly demanding those actions of the employees. It's wasn't some 'strategy' that many individuals at the bottom figured out to meet unreasonable expectations. If anything it was probably middle management coming up with that strategy to meet the unreasonable demands coming from higher up. It's conceivable the CEO didn't know about it, but I highly doubt the people one or two rungs down didn't. These practices were reported by objecting staff all the time and ignored. It was no secret for anyone who worked there. It was a known fact for employees that reporting such things and objecting to them was  ticket out of there.

Seriati

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #8 on: September 22, 2016, 12:56:19 PM »
Just FYI, I've read accounts from former Well's Fargo employees, and the management clearly knew about the scam and were almost certainly demanding those actions of the employees.

Fenring, you're talking about a major bank.  The level of "management" that knew about the scam and demanded those actions is at the branches, that "management" is itself no different than disposable employees themselves from the level of the senior management that set the policies.  There is no one in a branch of a bank that is remotely part of the senior management or policy setters of a bank.

To give you a military analogy, the highest officer in a branch is only a corporal or very junior sergeant. 

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It's wasn't some 'strategy' that many individuals at the bottom figured out to meet unreasonable expectations. If anything it was probably middle management coming up with that strategy to meet the unreasonable demands coming from higher up.

Honestly, wasn't even "middle management," which roughly equates to regional branch managers.  Again, its unlikely that any of the middle managers were even personally known to the policy setters and senior management (in some cases even their bosses names wouldn't be known). 

I have a corporate headquarters bias myself, so when I talk about employees, there is no one working in a branch that isn't included in that description.

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It's conceivable the CEO didn't know about it, but I highly doubt the people one or two rungs down didn't.

No idea if this would be the case, could have been internally reported and ignored, though I seriously doubt it.  But again, I don't think you have a real understanding of how much hierarchy there is at a bank.  2 levels "down" from a CEO on direct reports won't get you out of the corporate headquarters, less than (and probably much less than) 100 people.  At best, it'll include a handful from "branch operations" that are so far above the people were talking about that there are at least 10 more levels of bosses and managers between them.

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These practices were reported by objecting staff all the time and ignored. It was no secret for anyone who worked there. It was a known fact for employees that reporting such things and objecting to them was  ticket out of there.

It was no secret for anyone who worked where?  Wells Fargo has over 6000 branches (not including their non-branch offices) and over 250,000 employees.  5,000 employees works out to less than 1 per branch, that's 1% of the employees fired over multiple years selected from the very lowest level of employees in the group.  It only sounds like a lot in isolation.  It's entirely possible that senior management was not aware that there was a wide spread or routine fraud going on. 

They should be held accountable for the fact that their policies encouraged it.  And it could be criminal if the reports about whistleblowers are true, and/or if the compliance department identified a systemic issue and ignored it.

scifibum

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #9 on: September 22, 2016, 02:24:54 PM »
I like Bernie Sanders's point that this scandal is evidence of a bank that's simply too big.  Too many layers of management, too much plausible deniability, and incentive structures that play to the weaknesses of those aspects.  I'm not expecting anything to change, though.  The bipartisan outrage is just opportunistic - OK, here's a safe way to pretend we aren't always on the side of the corporations, because this one went way out on a limb we don't need to keep open for others.

DonaldD

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #10 on: September 22, 2016, 03:02:17 PM »

Fenring, you're talking about a major bank.  The level of "management" that knew about the scam and demanded those actions is at the branches, that "management" is itself no different than disposable employees themselves from the level of the senior management that set the policies.  There is no one in a branch of a bank that is remotely part of the senior management or policy setters of a bank.

What you are missing, Seriati, is that, yes, some of these activities are at the branch level (and some likely at call centre levels).  But a single branch's policy could not have affected 5300 people - heck, even 100 branches could not likely have led to 5300 such employees.

You are still left with over 100 branches conspiring amongst themselves to facilitate this fraud.  It is simply unreasonable to believe that such communications, between dozens, but probably hundreds, of branch managers was not itself instigated above the branch level.  it also remains to be seen if these 5300 were geographically grouped, or distributed across the enterprise.  If distributed, then you are talking about even higher levels of knowledge. 

Also, as Fenring and the article I linked to pointed out, employees who claim to have been fired for blowing the whistle on these practices are coming out of the woodwork, some of whom made the claims years ago. Some of these people also claim to have corroborating witnesses - and one at least of which sent an email to the CEO on the subject.

Seriati

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #11 on: September 22, 2016, 03:31:51 PM »
No, just no Donald.  The policies (8 accounts per customer) were set at the senior management level.  The implementation (which was impossible) was left to the peons at 6,000 branches to implement and to be judged as failures or successes against.  In that set of circumstances, impossible goal that you can't dispute, challenge or even contribute feedback on, set by someone removed at least a dozen levels of management from you, it doesn't take a conspiracy to see this effect.  It takes people realizing that the goal is impossible, and that there is an easy way to achieve it (ie creating fake accounts).  No one at one branch has to talk to anyone else for that to result, all it takes are employees and branch managers who are desperate to report success.

Not saying that some of them didn't collude, or that there wasn't a top down policy, just pointing out that given those circumstances its entirely probable you'd find this occurring even without a conspiracy.

To take into a different venue, that it may be easier to see.  Do you recall that one of the complaints against ACORN was that its voter registration efforts paid by the number of unverified voter registrations its operatives submitted.  Do you really think it took a top level directed conspiracy to cause some people to make up fraudulent registrations to meet their goals?  I think, in the same way as with Wells Fargo the policy itself created the incentive, but it doesn't take a top down directive once the incentive and obvious solution are created to get the predictable fraud to occur.

I acknowledged the whistle blower claims could have teeth.

DonaldD

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #12 on: September 22, 2016, 06:36:05 PM »
Well, no, just no, right back at ya, Seriati! :)

That these 5300 front line employees (or even just hundreds of branch managers) just coincidentally used the same techniques is more than somewhat unlikely - creating fake email accounts, fake PINs and other prerequisites of creating new active accounts and credit cards is just not something that is likely to have occurred to even just those hundreds of branch managers independently, yet in exactly the same way.

That some of the complainants coming forward now make it clear the the branch managers were pushing the front line employees just furthers the narrative. And I go back to my previous point - you've got hundreds of branch managers doing the same thing, in the same way at the same time. Sometimes, the simplest answer is also the truth.  And the simplest explanation is not that they all independently came up with the same hack.

And since we know people are claiming that they complained to HR and the tip line about these practices, you need a whole other level of independent ethical misdeeds by a completely separate group, where HR was independently on board with hiding the bad actions of hundreds of unrelated branch managers who were coercing or at least encouraging illegal activities by their employees.

At some point, this complicated and independent set of conspiracies just falls apart.

Gaoics79

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #13 on: September 22, 2016, 07:03:19 PM »
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It was no secret for anyone who worked where?  Wells Fargo has over 6000 branches (not including their non-branch offices) and over 250,000 employees.  5,000 employees works out to less than 1 per branch, that's 1% of the employees fired over multiple years selected from the very lowest level of employees in the group.  It only sounds like a lot in isolation.  It's entirely possible that senior management was not aware that there was a wide spread or routine fraud going on. 

They should be held accountable for the fact that their policies encouraged it.  And it could be criminal if the reports about whistleblowers are true, and/or if the compliance department identified a systemic issue and ignored it.

I don't know about the law in this area, but maybe there needs to be a form of strict liability directly and personally attributable to bank executives. Whether that would take the form of fines or jail time might depend on the nature of the offence. We already apply forms of strict or absolute liability to corporations in the case of environmental spills, at least here in Canada. If your company causes certain kinds of environmental damage, negligence does not factor into it - the company is held responsible period full stop. This does not target individual executives personally that I know of, but maybe in this case it should.

I strongly suspect that if an executive were facing personal financial consequences in the form of fines (or even jail), the clouds of bureaucracy would roll back and accountability would pierce through like a thunderbolt down to the lowliest front line employee.

I wouldn't have alot of moral compunctions about this either, and suspect that for what even "middle management" likely gets paid in a big bank, there would be no shortage of people willing to take on the heavy responsibility.

What's clear is that the current system of accountability isn't working.

Mynnion

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #14 on: September 22, 2016, 10:59:15 PM »
I have a very hard time believing that Corporate would be unaware of a million + fraudulent accounts.  Customers complain.  Even if only a small percentage complained the fallout would be enough to generate reports that would reach management.

Seriati

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #15 on: September 23, 2016, 02:28:28 PM »
That these 5300 front line employees (or even just hundreds of branch managers) just coincidentally used the same techniques is more than somewhat unlikely - creating fake email accounts, fake PINs and other prerequisites of creating new active accounts and credit cards is just not something that is likely to have occurred to even just those hundreds of branch managers independently, yet in exactly the same way.

What makes you think that there was something unique or special about the way in which it occurred?  Creating fake accounts is not only NOT some secret special technique of great difficultly it's also the simplest and easiest to implement fraud that can be used to meet sales targets.  It's something that any employee would be able to figure out how to do, unless you had an active compliance function confirming the accounts.  Even when someone calls in and complains that they didn't open the account, it'd only be their word against a computer record and an employee.

The other obvious version of the fraud, would be to tweak the records showing that account opening targets were met without opening the accounts, but that one is incredibly easy to catch using upstream and headquarter's computing records.

Don't know why you're acting like this rocket science.  If you have to open x accounts every day, and you can only find y people, virtually everyone on earth would consider they could just make up some people (most people, would of course, choose not to do so).

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And I go back to my previous point - you've got hundreds of branch managers doing the same thing, in the same way at the same time.

5300 employees were fired from 6000 branches over SEVERAL years.  Even if you assume it's only 3 years, that still means less than one employee from every 3 branches in a given year.  If you believe it was a manager pushing the deal then likely there were branches with multiple employees fired, If you had 5 employees fired from a branch on average, over just 3 years, only 1 in 20 branches would have been involved.  Again, your argument relies on looking at something in isolation, and treating it like its bigger than it was.

Not to say that even at this level of evidence the problem should not have been clearly apparent to senior management.  They should held accountable for any number of things, including setting unreasonable goals and failing to create a culture of compliance.   But you don't need  a grand conspiracy to see this level of fraud.

Fenring

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #16 on: September 23, 2016, 02:42:38 PM »
What makes you think that there was something unique or special about the way in which it occurred?  Creating fake accounts is not only NOT some secret special technique of great difficultly it's also the simplest and easiest to implement fraud that can be used to meet sales targets.

This part of your statement suggest to me the opposite of the argument you're making. It's precisely because thousands of people committed fraud that I question whether each case could be in isolation. Why would people who go do a lousy job every day put themselves on the line by committing fraud? It's not like they have a stake in the company and will do anything it takes to keep it profitable. You could argue that it was their jobs on the line and that might be incentive enough, but I'm not so sure. If your boss (assuming you have one) gave you an ultimatum where you had to commit fraud against your customers, would you do it? Maybe some would and some wouldn't under that kind of pressure. But now let's say you received no such instruction and you were just told to meet a quota that you couldn't. What kind of idiot would just decide on their own to initiate a scam - both against their employer and their customers - to create effectively fake accounts and bogus charges? Maybe some oddball might do it, thinking the characters in Office Space are his heroes, but thousands of people? No, I don't believe that's a reasonable guess as to what happened. It's not like they were working for a crappy nothing company in the boonies where no one cared anyhow and they'd never be audited. We're talking about a major bank, and I'm sure the staff was given strict guildelines upon being hired regarding how serious the work is and the kind of scrutiny such a company can be subject to.

Seriati

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #17 on: September 23, 2016, 03:08:17 PM »
Fen, maybe I'm looking at this through a different lens than you guys are.  Consumer accounts are the least profitable accounts that banks run, in some cases they can be net losers.  In aggregate they can generate real fee amounts.  But I don't see it as a great recipe for success to create fake consumer accounts by the bushel, many of which probably never payed any material fees.

On the other hand, they do satisfy the otherwise unachievable sales goals.  I can honestly see low level bank employees seeing it as essentially a victimless crime.

DonaldD

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #18 on: September 26, 2016, 06:16:01 PM »
http://money.cnn.com/2016/09/26/investing/wells-fargo-fake-accounts-before-2011/index.html

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"These practices were going on way before 2011," said Susan Fischer, a former Wells Fargo branch manager, who worked at the bank for five years, starting in 2004.

...

Fischer said she remembers her district manager instructing her in 2007 to make the employees reporting to her open unauthorized accounts. It was about a year after she moved from Wisconsin to Arizona to manage a Wells Fargo branch.

"My district manager told me, 'Do whatever you need to do,'" Fischer said.
So, at least one district manager instructing branch managers to have their low-level employees commit fraud - a fraud that cost the account holders monthly fees, overdraft fees in some cases, etc. - so, not victimless.

scifibum

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #19 on: September 26, 2016, 07:00:27 PM »
Holding employees accountable to unrealistic sales targets seems like enough to cause this to happen, absent strict controls that will catch and punish the fraud. 

It may start with a relatively benign bonus structure that someone exploits without being under threat of firing - but once that happens, there's an example that higher ups can delude themselves into thinking is what they can extract from everyone, if they just crack the whip.  So they get cracking, because they stand to earn big bonuses. 

The cracking produces some results: some additional people who find more upside in appeasing their bosses than in behaving ethically. 

It snowballs.  The execs know the sales targets and management pressure produce great results.  They aren't going to accept excuses when they have data to prove it.  The front line reps and low level managers probably don't overtly advise or condone this stuff, but it gets whispered among peers or hinted at.

There's nothing un-obvious about the way this was done - when you are being told to upsell existing customers, but customers aren't interested, you land at pretending they said yes. 

This fits very well with my experience of how large corporations work.  Targets are set, and careers are staked, on arbitrary numbers.  The pressure rolls downhill and the front line has to get very creative to figure out how to appease the bosses.

The thing that I want Congress and stockholders to realize is that this IS just as bad as a conspiracy to commit fraud that traverses all levels of the organization.  You CAN guarantee malfeasance without committing it.  This should be in textbooks and should be used to inform criminal codes. 

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I strongly suspect that if an executive were facing personal financial consequences in the form of fines (or even jail), the clouds of bureaucracy would roll back and accountability would pierce through like a thunderbolt down to the lowliest front line employee.
Abso-frickin-lutely.

Fenring

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #20 on: September 26, 2016, 07:08:54 PM »
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I strongly suspect that if an executive were facing personal financial consequences in the form of fines (or even jail), the clouds of bureaucracy would roll back and accountability would pierce through like a thunderbolt down to the lowliest front line employee.
Abso-frickin-lutely.

More than just that. If you made executives accountable for all malfeasance, whether or not they had anything to do with it, the result would be that they'd be forced to institute a system of controls that would make it impossible for this kind of thing to happen. In other words, they'd have an incentive to do what ethics would demand they should have done anyhow. But ethics doesn't work, so you need to bring in the hammer.

As it is the way these corporations tend to be structured - whether it's a major bank, Target, or whomever else - the current system incentivizes executives going all the way up to CEO to take any steps they wish that will give them higher bonuses, including and often involving them screwing over the company or the customers for their own private profit. It's a known problem that CEO's, for instance, will take ethically shady actions, such as liquidating some of the company's assets, in order to produce a short-term gain for the company even though they've hurt it's long-term prospects. When they're caught they take their golden parachute and retire in comfort, presuming they don't end up CEO elsewhere or on some board where they earn a paycheck for doing nothing.

DonaldD

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #21 on: September 27, 2016, 06:07:57 AM »

Seriati

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #22 on: September 27, 2016, 09:28:40 AM »
More than just that. If you made executives accountable for all malfeasance, whether or not they had anything to do with it, the result would be that they'd be forced to institute a system of controls that would make it impossible for this kind of thing to happen. In other words, they'd have an incentive to do what ethics would demand they should have done anyhow. But ethics doesn't work, so you need to bring in the hammer.

Wells has a quarter of a million employees, there is some malfeasance every day, and they have incredibly comprehensive system to catch and punish people engaged it.  There is absolutely no way to get to a zero malfeasance reality.  A punishment based on an impossible standard is a bit ridiculous.  What you can do is punish incentives that cause a predictable and likely fraud where controls are not put in place to catch that fraud.

TheDrake

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #23 on: September 27, 2016, 09:37:13 AM »
If you held executives accountable for everything done in their organization in the manner described, you would see a number of things happen.

1. Elimination of any remaining autonomy for individual employees.

2. Constant monitoring and oversight beyond what we already see. Once they are being monitored for ethics under this scrutiny, you will have managers using that data to complain that you took too long for a potty break.

3. Accelerating a push to AI

I don't think that would be such a good thing.

In the specific category of sales, I question whether these quotas were really unattainable without cheating. Did all of the people earning bonuses create fake accounts? I read the following:

"The suit represents California employees who worked at Wells Fargo in the past 10 years or who continue to work there and were fired, demoted or forced to resign due to not meeting their sales quotas."

That is very different from being fired for not opening fake accounts. Fischer says:

"My district manager told me, 'Do whatever you need to do,'"

And also:

However, a confidential Wells Fargo sales quality manual that was last updated in August 2007 suggests the bank's compliance team was aware of issues even then.

The document, used in a 2011 legal case against the bank, stressed that employees must obtain a customer's "express consent and agreement" -- those words were underlined and in bold -- for each and every line of credit opened.

Which seems a very clear directive.

Now there are other accounts of retaliation firing, which are clearly disturbing. I think it makes more sense to hold executives accountable for retaliation than all bad practices going on that they might not know about.

I am surprised that the wrongful termination suits only started after the big news broke. I would think that if all these people were being fired, they would have been aware of each other and that the employee lawsuit would have been the leading action.

Note this isn't the first time sales quotas generated unethical behaviour.

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This is certainly not the first time that a high-profile sales scandal like this has hit the press. In the early 1990s Sears sought to restore its reputation with $46 million in coupons because some employees of its automotive repair division (who were paid a commission on sales of parts and services) had allegedly enticed customers into authorizing and paying for needless repairs. In 2005 the world’s largest insurance broker, Marsh Inc., paid $850 million in fines in the aftermath of accusations that it had received kickbacks from insurance companies for steering business their way — a scheme at odds with Marsh’s commitment to finding the best deal for customers.

Wells Fargo and the Slippery Slope of Sales Incentives

It may be best to assume that your employees will cheat if they can, and eliminate any incentives that are formulaic and can be gamed. Or, you might want to tie your incentives in a way that makes cheating much more difficult. In this case, Wells Fargo compensated employees based on opening new accounts. They might have better tied the goals to active accounts only. This would eliminate any value for enticing customers to open accounts they don't need, cajoling friends and family to open accounts, or the more fraudulent opening accounts without permission.

Few of these extra accounts appear to have made Wells Fargo any money. Their key metric of "number of accounts opened" was a serious flaw, IMO, apart from the level of the incentives or the practices condoned.

Fenring

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #24 on: September 27, 2016, 11:12:50 AM »
I don't really think low-level employees cheating in this way is all that complicated to deal with. Make the rule that if they cheat in such a way as to defraud anyone they will go to jail. Period. The company will prosecute, end of story. If the managers know about it and don't put a stop to it - THEY will be prosecuted. And so forth. If the manner of cheating takes the form of something merely against company policy but not strictly speaking illegal (such as faking reports but not actually creating fake accounts) then it may be harder to stop it and the incentives have to be looked at. The way to deal with impossible quotas is simple; if the employees cannot make them, then most of them will fail. Those few who find a cheat workaround will pass, but most won't think of it and the it will become clear to management that the quota is a failure.

I'm also not sure what the laws are (especially state by state) about deliberately screwing over your own company by lying to them on reports to make it appear you did something you didn't. I was under the impression that by taking a job one tacitly takes on the legal responsibility of trying to make the company succeed, and that if you ever take steps designed to cause it trouble you are in violation. I'm just sure if that's a criminal violation or merely grounds for dismissal. Probably the latter; maybe a lawyer can clarify.

Fenring

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #25 on: September 30, 2016, 09:33:21 AM »

DonaldD

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D.W.

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #27 on: October 12, 2016, 09:10:20 PM »
That's why they get paid the big bucks.  Being a sacrificial lamb pays well.  And the machine grinds forward after providing a little spectacle for the public.

AI Wessex

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #28 on: October 13, 2016, 07:40:32 AM »
It's odd how the CEO "club" operates.  Him resigning and taking megabucks with him signals other big companies that he's available and they'll have to pay him a fortune.  The fact of his resigning is meaningless, especially if WF was profitable and grew during his tenure.

D.W.

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #29 on: October 13, 2016, 10:30:52 AM »
Well at least I heard he isn't getting a severance package.  So maybe just "super bucks" instead of "mega bucks"?  :)

TheDrake

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #30 on: October 13, 2016, 11:41:12 AM »
Most CEOs are smart enough or privileged enough to get severance clauses built into their contracts. The companies can't legally avoid paying most of these big exits.


scifibum

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #31 on: October 13, 2016, 12:36:45 PM »
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Most CEOs are smart enough or privileged enough to get severance clauses built into their contracts.

I'd say "on other boards enough".  It's a thing they do for each other. 

TheDrake

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #32 on: October 13, 2016, 01:02:42 PM »
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Most CEOs are smart enough or privileged enough to get severance clauses built into their contracts.

I'd say "on other boards enough".  It's a thing they do for each other.

Yes, that too. Stumpf is on the boards of Target and Chevron as well. I love theyrule.net to find this stuff. So far, those companies are not committing to moves, but some are calling for him to be kicked out of there also.

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Stumpf has also served on the board of oil giant Chevron Corp., based in San Ramon, since 2010. Chevron spokesman Kent Robertson said in an email Wednesday that under company policy, “continued service on Chevron’s Board of Directors upon change in job status is a matter that must be addressed by the Chevron board. Therefore, it would be premature to comment at this time.”

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The shareholder, Aaron Epstein, said in an ad Thursday in the Minneapolis Star Tribune - Target is headquartered in Minneapolis --  that the retailer's founders' legacy is "endangered" by the presence of Stumpf on its board. "Stumpf may or may not have known of the frauds but as CEO he should have known," the advertisement said. "To preserve the positive legacy bequeathed to us by our company's founders, I urge you to do the right thing and seek Mr. Stumpf's resignation."

AI Wessex

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #33 on: October 13, 2016, 01:41:02 PM »
Well at least I heard he isn't getting a severance package.  So maybe just "super bucks" instead of "mega bucks"?  :)
I think that's true.  I heard that he's leaving with just $120M, having sacrificed an additional $41M in stock options.  The board may yet review his compensation and withhold an additional $24M.  Wow, talk about getting screwed!

DonaldD

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #34 on: October 18, 2016, 01:28:40 PM »
So, it turns out that Wells Fargo executives and board had to have known about the existence of the fraudulent practices, although arguably not their widespread nature, at least as far back as 2008:

http://money.cnn.com/2016/10/18/investing/wells-fargo-warned-fake-accounts-2007/index.html

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The employee won a federal whistleblower case against Wells Fargo in 2008 for a similar complaint.
The gist of the whistleblower's warning to the company was that the illegal activity in Northern California was "widespread and so highly encouraged that it has become a normal sales practice." This from a complaint lodged in 2007.

It's highly unlikely that the board and the executive team remained ignorant of such a legal finding against the company.

Seriati

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #35 on: October 18, 2016, 04:29:22 PM »
DonaldD, the most interesting quote from that link:

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CNNMoney hasn't been able to determine whether the letters were actually sent, nor whether Stumpf or the board members read or received them.

That's kind of an important point don't you think?

In any event, I'm still amazed at how small company you guys think on something like this.  I can't find statistics on this, but I'd be shocked if Wells Fargo is involved in less than 2,000 lawsuits a year.  Only a few of them, involving massive amounts, get to the level of Board review.  Not making a claim, cause I don't know one way or the  other, but it's entirely possible that he wouldn't have personal knowledge of a matter like that, or more likely that it showed up as one line in a hundred page risk report with a solution right next to it that he "approved".  Never can tell though.

DonaldD

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #36 on: October 18, 2016, 05:05:15 PM »
Not really - because the whistleblower won his court case against WF - so even if it's not known whether the emails themselves ever made it to Stumpf or the board, the fact that the company lost a court case, wherein one of its employees was found to have been punished for informing the company of fraudulent activity... it would be very surprising that the broad facts of such a case did not become known to them.  In fact, the board NOT taking an interest in such a lost court case could be seen as ignoring their fiduciary responsibilities to the corporation.

As to lawsuits brought against the corporation (and won) by the Department of Labour in support of one of the firms employees?  That does not happen thousands of times a year.  Even in the article, it states the following: "Just 2% of whistleblower cases are found in the favor of employees, according to a 2010 Labor Department Inspector General report."

It should also be understood that the complaint itself triggered Sarbanes-Oxley protections: any corporation finding themselves on the wrong side of a Sarbanes-Oxley ruling in 2010 would stand up and take note.

Seriati

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #37 on: October 19, 2016, 11:37:00 AM »
Not really - because the whistleblower won his court case against WF - so even if it's not known whether the emails themselves ever made it to Stumpf or the board, the fact that the company lost a court case, wherein one of its employees was found to have been punished for informing the company of fraudulent activity... it would be very surprising that the broad facts of such a case did not become known to them.  In fact, the board NOT taking an interest in such a lost court case could be seen as ignoring their fiduciary responsibilities to the corporation.

Again, small company thinking.  Banks lose court cases every single day.  And on something like this, its their compliance staff that is responsible for dealing with it.  I wouldn't be surprised if 20% of HQ staff was compliance in a bank of that size.  Bank regulators actually have offices inside the headquarters of banks that size, and are involved every day in giving the bank feed back on literally thousands of laws, many of which are far more significant to the bank overall than this would be.  Yes a whistleblower claim is important, but there are literally thousands of things of equal or greater importance in the compliance world that come up every year for a bank of that size.

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As to lawsuits brought against the corporation (and won) by the Department of Labour in support of one of the firms employees?  That does not happen thousands of times a year.  Even in the article, it states the following: "Just 2% of whistleblower cases are found in the favor of employees, according to a 2010 Labor Department Inspector General report."

It should also be understood that the complaint itself triggered Sarbanes-Oxley protections: any corporation finding themselves on the wrong side of a Sarbanes-Oxley ruling in 2010 would stand up and take note.

Like I said, I don't know on this one, and neither do you.  It's totally possible this got high level review and discussed at the Board level for hours, but its also totally possible it got dealt with by compliance officers at a much lower level and all that came to the board was a couple lines on a risk report. 

DonaldD

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #38 on: October 20, 2016, 08:02:44 AM »
Again, the thinking of somebody who understands neither corporate governance nor statistics.  Getting sued by an employee and the Labour Department is no small thing for a bank.  Losing a case that is only successful 2% of the time is not something that occurs 2,000 times a year even for the largest corporations. That's just fantasy.

DonaldD

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #39 on: October 25, 2016, 11:51:22 AM »
And the bleeding continues - http://money.cnn.com/2016/10/25/investing/wells-fargo-workers-mental-health-nightmares/index.html:
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The culture was not easy on even the managers. Susan Fischer, a former Wells Fargo branch manager in Arizona, said she suffered "severe depression and anxiety" after being pushed to instruct employees to open unauthorized accounts in 2007. Fischer had to take medical leave and ultimately resigned in 2008 due to the stress. "It was an extremely dark period for me," she said.

TheDrake

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #40 on: October 29, 2016, 12:18:12 PM »
And the bleeding continues - http://money.cnn.com/2016/10/25/investing/wells-fargo-workers-mental-health-nightmares/index.html:
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The culture was not easy on even the managers. Susan Fischer, a former Wells Fargo branch manager in Arizona, said she suffered "severe depression and anxiety" after being pushed to instruct employees to open unauthorized accounts in 2007. Fischer had to take medical leave and ultimately resigned in 2008 due to the stress. "It was an extremely dark period for me," she said.

I wish there were more on this story. I don't understand the situation. If my boss pushed me to do something illegal, I'd be going to HR immediately. If HR didn't do something, I'd be headed to the attorney general, FDIC, DOJ, the press, twitter, everybody. I haven't yet found the golden employee story that made every effort, or even a reasonable effort, to expose these horrible practices. This one got sick and resigned. Oh.

DonaldD

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #41 on: October 29, 2016, 06:53:47 PM »
Well, there was the follow who complained to HR, then the Labor Department, that went on to win its case against the company ... but that was earlier in the thread.

TheDrake

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #42 on: October 31, 2016, 11:01:25 AM »
True, but his lawsuit was about being retaliated against and whistleblowing. And recent class actions are about the same. Labor Deparment is about getting wages back and damages for getting fired, not hte fraud itself.

Apparently there were lots of complaints from customers too, typically handled by refunding money and blaming it clerical/computer error.

I guess part of what I'm wondering is if the fraud was reported as fraud by employees who were in good standing. And if so, what happened to the people getting reports? We know that the LA Times started publishing in 2013, which is what broke all this. The LA city attorney filed a lawsuit in 2015.

Since the fraud was widespread, what took so long for consumers to be protected? Apart from management, how were employees and public watchdogs not able to shut the practices down? None of which excuses management actions, but it just makes me curious. Is it that hard to stop massive fraud?


DonaldD

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #43 on: April 10, 2017, 06:04:34 PM »
What do you know... the company's chief auditor and HR personnel were well-aware that it was creating an environment that encouraged fraud and instilled fear of unemployment for not acting fraudulently as far back as 2004. So yes, this knowledge went up as far as the 'C' level of the company as well as to the board of directors.
http://money.cnn.com/2017/04/10/investing/wells-fargo-board-investigation-2004-report/index.html
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That investigation, titled "Gaming," warned that Wells Fargo employees had an "incentive to cheat" that was "based on the fear of losing their jobs." It said that workers felt they couldn't meet the bank's unrealistic sales goals "without gaming the system."
The 2004 report was sent to Wells Fargo's chief auditor, HR personnel and others. The Wells Fargo (WFC) task force even cautioned that the bank faced "reputational risks" with customers and recommended management consider eliminating the sales goals.





linuxfreakus

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #44 on: April 11, 2017, 01:07:46 AM »
Sickening.  These people should be in jail. Judging by the continued interest in Hillary Clinton’s speeches to Wall Street, the public has certainly not forgotten the role of the bank behemoths in the last financial crisis and the industry's ongoing struggles with the law, it can't go on like this forever, there will literally be torches and pitchforks eventually.

I'm pretty sure the next shoe to drop is gonna be the auto industry though.  Car loans are so predatory its unbelievable.  Its going to blow up eventually.  I hope not with another huge bailout though.
« Last Edit: April 11, 2017, 01:09:59 AM by linuxfreakus »

Fenring

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #45 on: April 11, 2017, 01:49:31 AM »
Defrauding a select few clients is already outrageous. Systemically defrauding massive swathes of the general public - in effect, targeting as many within the population as possible - seems to me to go beyond a white collar offence. Dare I suggest that parties responsible for betraying the trust of the entire public should go up for treason?

DonaldD

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #46 on: April 11, 2017, 06:10:09 AM »
Why not cut to the chase and charge them with capital murder? :)

TheDeamon

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #47 on: April 11, 2017, 10:03:18 AM »
Sickening.  These people should be in jail. Judging by the continued interest in Hillary Clinton’s speeches to Wall Street, the public has certainly not forgotten the role of the bank behemoths in the last financial crisis and the industry's ongoing struggles with the law, it can't go on like this forever, there will literally be torches and pitchforks eventually.

Last time around, Wells Fargo was actually one of the "good actors" in 2008, they were solvent and in a good position financially even after the crisis hit. The only reason they "took a bailout" was so they could use that money to acquire several other banks that had failed during that economic crises. Even with that being done, IIRC, they were one of the first ones to have paid back their bail-out monies as well.

So even as screwed up as those practices were, they had done nothing to endanger that bank at large, at least as of 2009.

linuxfreakus

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #48 on: April 11, 2017, 11:08:12 AM »
Last time around, Wells Fargo was actually one of the "good actors" in 2008, they were solvent and in a good position financially even after the crisis hit. The only reason they "took a bailout" was so they could use that money to acquire several other banks that had failed during that economic crises. Even with that being done, IIRC, they were one of the first ones to have paid back their bail-out monies as well.

So even as screwed up as those practices were, they had done nothing to endanger that bank at large, at least as of 2009.

Well, just because they didn't require a bailout doesn't mean that still haven't been contributing the the toxic culture in the financial world.  Its almost impossible to find a "good" bank anymore.  They are nearly all crooked.  Quite a few of the predatory and deceptive practices they use are not technically illegal, but they should be.

Wayward Son

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Re: Wells Fargo ~5300 member class action upcoming?
« Reply #49 on: April 11, 2017, 11:19:06 AM »
Quote
Judging by the continued interest in Hillary Clinton’s speeches to Wall Street, the public has certainly not forgotten the role of the bank behemoths in the last financial crisis and the industry's ongoing struggles with the law, it can't go on like this forever, there will literally be torches and pitchforks eventually.

I wouldn't bet on it, linux.  After all, rather than elect someone they suspected of being in the pocket of Wall Street, they elected a man who appointed Wall Street to run the country.  Not trusting Wall Street doesn't seem to be a high priority to most Americans. :)