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Wells Fargo Employee Informed the Bank of Fake Customer Accounts in 2006 (vice.com) 104

Posted by msmash from the body-of-lies dept.
Wells Fargo recently paid fines totaling $185 million for the creation of 2 million unauthorized accounts since 2011. But the international banking and financial institution could be committing this fraud since as early as 2005, according to a letter obtained by Vice News. From the report: A Wells Fargo bank manager tried to warn the head of the company's regional banking unit of an improperly created customer account in January 2006, five years earlier than the bank has said its board first learned of abuses at its branches. [...] A letter written in 2005 and obtained by VICE News details unethical practices that occurred at Washington state branches of the bank, suggesting the conduct began years before previously understood. Dennis Hambek, a former branch manager in West Yakima, Washington, sent a certified letter in January 2006 to Carrie Tolstedt, then Wells Fargo's head of regional banking, outlining unethical "gaming" activity at area branches. In 2007, Tolstedt was made the company's head of community banking, the division where many of the unethical practices occurred.
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Wells Fargo Employee Informed the Bank of Fake Customer Accounts in 2006 More

Wells Fargo Employee Informed the Bank of Fake Customer Accounts in 2006

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  • Well this is exciting (Score:5, Insightful)

    by Anonymous Coward on Wednesday October 12, 2016 @12:35PM (#53063139)
    I'm super stoked to see absolutely nobody see the inside of a prison cell over this, Wells Fargo slapped with a fine a tiny fraction of a percentage of what they took in by this scam, and then go about business as usual.

    • Re:Well this is exciting (Score:5, Insightful)

      by Oswald McWeany ( 2428506 ) on Wednesday October 12, 2016 @01:10PM (#53063523)

      It's not like they did something reprehensible, like pee in the woods and get spotted, or smoke MJ recreationally.

    • Re:Well this is exciting (Score:4, Interesting)

      by magarity ( 164372 ) on Wednesday October 12, 2016 @01:14PM (#53063573)

      Wells Fargo slapped with a fine a tiny fraction of a percentage of what they took in by this scam

      I don't think the bank itself as a corporate entity made any money. This was employees trying to game the company for personal bonus money and to meet performance targets.

      • Re:Well this is exciting (Score:4, Informative)

        by PraiseBob ( 1923958 ) on Wednesday October 12, 2016 @01:43PM (#53063789)
        Do you seriously believe that? ...The bank implemented a fairly complex system of both punishments and rewards to motivate employees into taking these actions, which primarily devolved into millions of employees stealing hundreds of millions of dollars from their customers.

        And you think the bank just benevolently passed on ALL of the profits from this scheme to tellers, without any benefit to the corporation? The entire point of paying a sales commission or bonus is to give the employee a small cut of the profit and keep the main profit for the parent entity.

        • Re: (Score:1)

          by Anonymous Coward

          No, you're missing it: there were no profits. The bank rewarded customers because it mistakenly believed the additional accounts contained money that would benefit the bank. The employees were rewarded for the creation of the accounts, not for the amount deposited into them.

          • The CEO cited these phony numbers in earnings calls to artificially drive the company's value up, to his and other executives' direct benefit. He's cited as asking employees to aim for 8 accounts per customer, not because they need them but "because 8 rhymes with great." The employees were incentivized to open as many accounts as possible, those that bent the rules were rewarded and those that didn't open enough were probably just fired. Then, when the operation's exposed, those low level employees are the
          • Maybe you're the one missing what happened here. Bank employees took existing customer accounts, and then "cross sold" them additional products. Like another checking account, or 7 different savings account because 8 is great. Money would get transferred into those accounts to open them. Those customers then have to pay fees on those accounts. That isn't a fake person, its a fake account, attached to a real person, who's paying real money for it. Yes, there were also accounts created attached to fake cu

      • A small number of employees engaging in a given behavior may be those employees trying to game the system.

        A large number of employees engaging in a given hbehavior is called a business model.

        Plain and simple.

      • Re: (Score:1)

        by Anonymous Coward

        You are either deluded, stupid, or a shill for these people. Of COURSE they made money; had it NOT made them money, the corporate beancounters would have stopped it. Corporations do not do things that do not make them money.

    • Re: (Score:2)

      by Ant2 ( 252143 )

      Give a man a gun and he can rob a bank.
      Give a man a bank and he can rob the world.

    • That's incorrect, they made about 2 million and had to pay over 180 million for the fine.

  • I click on the vice link and the url indicates it should be an article about Wells Fargo but the article is really about US military involvement in Yamen.

  • WF is corrupt to the core (Score:4, Interesting)

    by The-Ixian ( 168184 ) on Wednesday October 12, 2016 @12:36PM (#53063151)

    That bank is, by far, the worst when it comes to ethical treatment of customers.

    Especially those who live on the edge (paycheck to paycheck). They have downright sinister overdraft policies and practices.

    I ditched WF years ago and I am happy to be rid of them.

    • That bank is, by far, the worst when it comes to ethical treatment of customers.

      They're all pretty bad. I was with a different back many years ago and they put a 3 day hold on all deposits of any kind. I had several accounts with them and my paycheck was wire transferred into this account automatically. Since the account my paycheck came into was the one I also wrote checks for bills against, I didn't think I needed to transfer any money into it to pay my bills one month. But then I had all of my checks bounce due to the 3 day hold. Of course they charged me $25 for each check and a b

      • Unfortunately Wachovia was bought out by Wells Fargo

        Yeah, that is part of the problem, WF has been buying up banks left and right for years.

        I always used to bank locally, but each time, WF would swoop in and buy the bank that I was using. This happened 3 times to me. At one point there were literally 3 WF branch offices within a couple miles of each other in my home town because they bought up the competition.

        I recently went to Bluebird (American Express owned company) for my bill paying and checking needs. It is all pre-paid. Overdrafts are impossible.

        I sav

        • Re: (Score:3)

          by Quirkz ( 1206400 )

          Aggressive retirement planning is admirable, but not if it's causing you day-to-day troubles. At least some small amount of emergency fund is advisable. If you're prone to overdraft, I'd recommend keeping part of that emergency fund in your main account, but then pretend like it's not there. For instance, put $1k in there, but then if the balance is $1,500, pretend it's only got $500. It could save a bunch of hassle and fees. Putting off retirement for a month or two or three to build in this padding might

          • Yeah, I just don't work like that.

            I diet in much the same way. By not keeping food in the house and forcing myself to walk or bike to the store in order to buy enough groceries for that day.

            I guess I would say, I have poor impulse control when it comes to money and food. Strangely, I have a pretty strong willpower in other areas.

            I usually don't have a problem, but like you say, when the emergencies come up, that's when the overdrafts used to happen.

            I also like to pay things off early even if it means I have

            • The bank I use allows for overdraft protection where if I overdraft they can take it out of my savings account or charge it against a credit card (as long as the account is with them) automatically with no fee. So you could set up a savings account with some balance or credit card that you otherwise never use for that purpose.

              However, the cynical side of me is saying that this is a feature they only offer to customers who keep a high enough balance that they would be unlikely to use it anyway.

      • Re:WF is corrupt to the core (Score:5, Interesting)

        by Moheeheeko ( 1682914 ) on Wednesday October 12, 2016 @01:20PM (#53063625)
        the best thing you could possibly do is find a local federal credit union. They may not have branches everywhere, but you can access all of your account from almost any credit union. I've been a member of the credit union of my hometown for years and ive never had to switch, despite not living within 100 miles of a branch.

        • Re: (Score:1)

          by Anonymous Coward

          the best thing is to find a GOOD local federcal credit union. Not every credit union is good.

          • Tried that. Then First Tech FCU bought them and turned them to dog shit.

            Getting "bigger" never seems to help the customer. I don't know why banks and credit unions (and airlines, et al) seem to think bigger is better. I guess it is for their management but certainly not for the consumer.

      • Where you *should* have gone is a credit union. I was screwed big-time by Bank of America back in the late 70s, and since then all of my personal/family accounts are with a federally chartered credit union. In fact, our current credit union has as its motto, "The bank that you own"... Every year, regular as clockwork, we get a varying size dividend deposit, based on how well the credit union did that year. Its varied, but usually between $100 and $200.. We've overdrawn our checking a time or two, and all th

    • Re: (Score:2)

      by dgatwood ( 11270 )

      Agreed. A few years back, I helped bail someone else who kept getting farther and farther behind because of their "payday loans" which had what is IMO usurious interest. I was appalled that they were allowed to do that, and even more appalled that they were allowed to continue to issue such loans over and over, effectively turning what might be tolerable short-term into an ongoing loan at a triple-digit APR.

      IMO, the company leadership should be in jail, customer assets should be returned to customers, an

      • Re: (Score:2)

        by dgatwood ( 11270 )

        Or at least I think the person in question was a WF customer (this was, after all, years ago, so my memory may be rusty). Either way, for sure, they are one of the predatory lenders that engage in that practice, so even if I'm wrong about that detail, the remainder of my post still applies.

        • WF hasn't offered payday loans for several years now. when they did, they had the most reasonable (eh, least unreasonable?) rates of any payday lender I've encountered.
    • They're nowhere near the worst. Google Citizens Bank (also, Charter One, a Citizens brand). Charter One fucked me harder in the 2 years I was with them than Wells Fargo, the only bank that would open an account for me after Charter One was done with me, has in the past 6. That is to say, Wells Fargo has actually treated me decently. My only complaint is that, as with most banks, their interest rates completely blow, but that's fine; I hold my savings with a different bank.

  • Risk Management: Playing the odds (Score:5, Insightful)

    by ADRA ( 37398 ) on Wednesday October 12, 2016 @12:39PM (#53063185)

    As anyone who's watched Mr. Robot knows, Just cheating the system doesn't stop a company from doing it, even when they're aware of it happening.

    If the fees minus inflation are less than the profits, why would a profit maximizing company ever decide to do the right thing? Its ludicrous. The company is simply charged a fee. The middle-managers and peons are rarely prosecuted and the executives always feign that they had no idea what was happening. There's no requisite paper trail to audit, so the only thing that could catch them is conspiracy to evade prosecution, but there'd have to be caught with a lot of 'shredding' in order to get that to stick.

    The laws are 100% stacked so that profit maximization is the only goal to achieve. Being a purely law abiding corporate citizen is a losers bet.

  • The company did nothing because it made them money and thus became company policy.

  • My account with Wells Fargo is my longest sustained credit item on my credit report. I've had an account with them since 1983 (well, it was a local bank that then got bought by them). It out-distances any of my other accounts by about 15 years of longevity (parents opened it for me when I was an infant). It'll knock my credit score down if I get rid of it....but maybe I should just stick the minimum balance in there and then never use it again.

    • Re: (Score:2)

      by imidan ( 559239 )
      As far as I know, deposit accounts don't affect your credit score (unless you end up owing money on them that goes to collections). I guess you if you have an overdraft protection/PLOC associated with your checking account, then you could lose points for closing it. But unless you have everything set up just right, you have to pay fees on WF checking accounts, so it could be a losing proposition to keep it open just to maintain a better average account age.

    • Re: (Score:2)

      by PRMan ( 959735 )
      If you do stick a minimum balance in there and never use it, you better watch it like a hawk so that when they raise the minimum balance without telling you, you won't pay thousands in fees before they inform you that you don't have enough in there.

  • OH BOY! (Score:1)

    by Anonymous Coward

    O-ho the Wells Fargo Wagon is a-comin' down the street,

    Oh please let it be for me!

    O-ho the Wells Fargo Wagon is a-comin' down the street,

    I wish, I wish I knew what it could be!

  • why they moved so quickly to get the settlement in. It absolves them of any other doings "just in case" something else rears up, ugly and painful.

    I wonder if that settlement can be tossed when it's shown that the execs knew or should have known that further breaches of the law, like these, had yet to be reported.

  • Boss then says, "Hmm" (Score:3)

    by fahrbot-bot ( 874524 ) on Wednesday October 12, 2016 @12:47PM (#53063289)

    Dennis Hambek, a former branch manager in West Yakima, Washington, sent a certified letter in January 2006 to Carrie Tolstedt, then Wells Fargo's head of regional banking, outlining unethical "gaming" activity at area branches. In 2007, Tolstedt was made the company's head of community banking, the division where many of the unethical practices occurred.

    Another person failed to understand the phrase: "don't give them any ideas".

  • Comment removed (Score:4, Interesting)

    by account_deleted ( 4530225 ) on Wednesday October 12, 2016 @12:53PM (#53063335)
    Comment removed based on user account deletion

    • As someone whose worked for a few large firms, it's impossible for some senior leader not to know.

      It's like the VW Diesel emissions scandal. What engineer just decides on their own to scam US emissions testing?

      The order came down from somewhere.
      Maybe it came directly from the top.
      Maybe pressure from the top to meeting emissions standards cause a senior manager to push this scam onto their team.

      About the only way it could be a rogue regular employee is if there's some really perverse incentive for them to ta

    • Re: (Score:2)

      by Tablizer ( 95088 )

      We need a white collar crime equivalent of Felony Murder while we're at it.

      Since about half the nation believes that "corporations are people", Wells Fargo should get the equivalent of the electric chair.

      Fire all the executives, auction the bank off, and give the auction proceeds to the victims. (And put the executives on trial.)

      Fry away!

  • This goes back to at least 2001 (Score:3)

    by Sarusa ( 104047 ) on Wednesday October 12, 2016 @01:01PM (#53063415)

    I know I've said it before, but customer complaints about the phantom accounts go back to at least 2001.

    The big thing here is that we now have a certified letter from a high ranking Wells Fargo employee that the crooks in charge of the illegal program were notified as early as 2006.

  • They Knew (Score:3)

    by Kozar_The_Malignant ( 738483 ) on Wednesday October 12, 2016 @01:12PM (#53063553)
    I find it difficult if not impossible to believe that Wells Fargo management didn't know this was going on. "Improperly created accounts" is one of the classic ways to steal from an employer. They're also great for laundering ill-gotten funds. Banks, insurance companies, and other financial institutions all have audit processes designed to ferret this out. So they knew, and they understood that it was their customers getting ripped off, and they were OK with that. Someone needs to go to jail, but that won't happen.

    • I find it difficult if not impossible to believe that Wells Fargo management didn't know this was going on.

      Being a worker at many Dilbertvilles, what the top managers do is set stringent goals, and order their immediate underlings to carry out the goals. Any "problems" are to be solved by the underlings, and the underlings get any of the blame. Example:

      Level 3 Boss: "Hey, Level 2 Boss, these tough sales quotas are resulting in our region's staff doing underhanded things to reach them."

      Level 2 Boss: "Well, t

    • "Improperly created accounts" is one of the classic ways to steal from an employer.

      Account 88888 at Barings bank.

  • The fact that this was sent as a CERTIFIED letter shows that it was
    a) widespread
    b) being actively ignored by management ...and that it was bad enough that Hambek felt he had to cover his OWN ass with a letter like this.
    I'm guessing at LEAST a year of bullshit preceded this letter, could be three or more.

  • 2 million seems like a lot of fake accounts. They reported they have 70 million customers in their last quarterly report, does this mean about 3% of their accounts are fake? That seems high enough for anyone investing in them as a company to reconsider.

  • We knew that WF was cramming peoples accounts with extra stuff way back when. I'm surprised that no one caught on until this news posting.

    Well, I'm glad that the fed caught up with WF and dropped Mr. 2-Pound on the CEO's toes for what they did.

    • Sorry I misread, but the gist is basically employees could not succeed without dishonest practices and managers were aware

  • I've been a long-time WF customer, and some years ago they started offering "Credit Defense". Credit Defense is an opt-out program that takes something like 0.8% of your current balance as a monthly charge to be used to make minimum payments on your card "in the event of injury or loss of employment". I was clued into it when I started looking closer at my statement after I made a couple large purchases.

    After calling the bank about it, I was told it's some separate party that handles that. Great, so my b

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