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

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.

Comments

Well this is exciting

[Anonymous Coward]

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

[Oswald McWeany]

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

[magarity]

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

[PraiseBob]

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:Well this is exciting

[Ant2]

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

Re:Well this is exciting

[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.

Re:Well this is exciting

[TheCastro1689]

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

Re:Well this is exciting

[BronsCon]

Overage fees on an account in my name that I did not open, for which the bank does not have a signature card on file that was signed by me or a copy of my photo identification with an actual photo of me on it? Yeah, not paying those.

Go ahead, send the account to collections where it'll take me all of 30 seconds to prove it's not mine.

No. There was no profit here.

Re:Well this is exciting

[Travis Mansbridge]

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 first to fall on their swords as the executives act like they had no hand in it.

Re:Well this is exciting

[sjames]

That was before we knew it has been going on since 2006.

Re:Well this is exciting

[clodney]

"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."

so the bank was giving bonus's and performance targets for things that didn't make them any money?

The bank was giving bonuses for things that they thought would make them money. Like many metrics and incentives, they were measuring something that was intended as a proxy for profit (since by the time the profit occurs they can no longer easily link it back to the individual). It was inevitable that the employees would do their best to game the system by pumping the metric, whether that led to profit or not.

Wells stated that they refunded something like $2.5M in fees that were charged to fraudulent accounts. However, I would assume that many people let themselves get talked into accounts that they didn't need, and have been paying fees on them ever since. They aren't fraudulent per se, more the equivalent of the new car dealership trying to sell you rustproofing and paint sealant that you don't need. So Wells is likely still generating income from accounts that are essentially useless, and only the result of high pressure sales tactics.

Re:Well this is exciting

[PraiseBob]

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 customers, but the bank employees can't simply open 100 different $0 accounts every day all day. The accounts have to have real money to be opened. Where the fuck do you think that money is coming from, the employees own pockets?

It was ALL stolen from existing customers.

Re:Well this is exciting

[cyberjock1980]

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:Well this is exciting

[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:Well this is exciting

[BronsCon]

They sell the account for pennies on the dollar, likely "making" $20 on a $500 debt. $500 in fees is the threshold for closure and sale of an account. They pay about $20 to the employee who opened the account so no, they didn't make any money; they *maybe* covered their costs.

Re:Well this is exciting

[BronsCon]

Care to clarify? Of course not, you'd rather just make unsubstantiated claims.

broken url to article?

[bano]

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.

Re:broken url to article?

[parkinglot777]

You can look at the article instead. The Vice link doesn't seem to work correctly (or need to register for the feed?).

Re:broken url to article?

[SB5407]

You have to use a browser instance with no add-ons or extensions for some reason.

WF is corrupt to the core

[The-Ixian]

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.

Re:WF is corrupt to the core

[The Grim Reefer]

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 bunch of other additional charges as well. After many phone calls and lots of bitching they returned all but $50. But it took a lot of my time to get them to do this. Once it was done I closed my accounts and went to Wachovia.

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

Unfortunately Wachovia was bought out by Wells Fargo and changing banks is a huge hassle. So I'll stay with them until they do something to really piss me off. Though I've been tempted to as I don't care for their behavior/lack of ethics.

Re:WF is corrupt to the core

[dgatwood]

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, any loans should be sold off, and the company should be shuttered and its assets sold, with the proceeds distributed to its customers.

Re:WF is corrupt to the core

[dgatwood]

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.

Re:WF is corrupt to the core

[The-Ixian]

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 save as much as possible (currently 25% of my pay) for retirement and so I live paycheck-to-paycheck and no matter how diligent I am, sometimes I overdraft. Even once a year could mean almost $100 in fees and a lot of hassle, all said and done... that is too much... it's not like it even costs the bank anywhere near that in processing or handling... they just need to pay for their big expensive buildings everywhere.

Re:WF is corrupt to the core

[Moheeheeko]

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:WF is corrupt to the core

[Quirkz]

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 be worthwhile.

Re:WF is corrupt to the core

[The-Ixian]

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 to eat peanut butter sandwiches.... So I will pay for a year of car insurance (for example) even though it blows my budget out of the water for months...

I am weird like that... but I have a system that (mostly) works.

Re:WF is corrupt to the core

[LVSlushdat]

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 they do is pull from our share account, with no penalties/fees.. Their car loans always beat anything you'd ever get from a bank or god forbid, the dealer financing..

Re:WF is corrupt to the core

[datavirtue]

Upvoting this. I recently joined a credit union and was able to refinance everything through them for a significant savings, Much easier to deal with and much more helpful. When shopping for a camper or car they dug right in and shared the commercial NADA data with me so that I was armed with that information when I went to dealerships. Will never bother with a traditional bank again.

Re:WF is corrupt to the core

[datavirtue]

If a bank runs a batch and generates fees due to applying debits before credits you need to contact the CFPB.

Re:WF is corrupt to the core

[Anonymous Coward]

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

Re:WF is corrupt to the core

[BronsCon]

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.

Re:WF is corrupt to the core

[BronsCon]

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.

Re:WF is corrupt to the core

[Bob the Super Hamste]

Of all of the federal government agencies I have had to deal with the CFPB is one I wouldn't mind dealing with again. Earlier this year I put the screws to a collection agency that fucked up really bad with me and got the CFPB, MN Department of Commerce, and MN Attorney General set upon them. I would probably take a similar route if I was a Wells Fargo customer that had this done to them because I can be a raging asshole to those who draw my ire.

Re:WF is corrupt to the core

[hambone142]

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.

Re:WF is corrupt to the core

[cyberchondriac]

If it's any consolation, at least they rejected the notion of shutting it down.They want the White House to supervise it.

Re:WF is corrupt to the core

[BronsCon]

The are owned by WF.

Got a reference for that? The only information I can find on their lineage is that they started with Y Combinator. They likely hold their accounts with Wells Fargo, which is what enables them to do same-day transfers to Wells Fargo customers; my wife and I can do the same thing (individual accounts, not joint) and, well, neither of us are owned by Wells Fargo.

They are headquartered at 225 Bush St., 11th Floor, San Francisco, CA 94104, whereas WF is headquartered at 420 Montgomery Street. San Francisco, CA 94104. I've actually been to WF's HQ a number of times, not always as a customer; hell, I've toured their old HQ in Berkeley from top to bottom, including vaults. I might know a thing or two about the organization.

Re:WF is corrupt to the core

[toddestan]

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.

Risk Management: Playing the odds

[ADRA]

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.

Company policy

[NatasRevol]

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

Might be time

[kaiser423]

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:Might be time

[imidan]

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:Might be time

[PRMan]

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.

Re:Might be time

[BronsCon]

It must be specific people within the organization; they forgave over $7000 of my wife's student loan debt so she could open a checking account 4 years ago. And no, it wasn't just a ploy to get her to deposit money so they could recover the debt; in fact, they've forgiven a handful of overdraft fees on her account in that time and have even offered her a line of credit, which she declined.

I'm not saying there aren't bad eggs, or even that bad eggs are the minority, but neither my wife or I have had any issues and I've been with them nearly a decade now.

OH BOY!

[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!

Now we know

[H3lldr0p]

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"

[fahrbot-bot]

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".

The most outrageous aspect

[MikeRT]

Is that there are at least a few examples of employees reporting to very senior leaders what happened and facing a targeted campaign of reprisal intended to ensure they could not work in that industry again (by revoking certification).

We need a white collar crime equivalent of Felony Murder while we're at it. If someone suffers financial loss as a consequence (foreseeable or not) of your criminal conduct, you are held liable as though you intended to cause it. Level of intent doesn't matter anymore once you reach legitimate felony intent.

Re:The most outrageous aspect

[scamper_22]

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 take this risk. But those are the outlier cases.

In my view the senior executives should always be held liable. Either they instructed it directly or they didn't have enough controls in place to detect it or they applied too much pressure on lower levels.

You can also prosecute lower levels as well, but I think the exec should always be prosecuted if any of the lower levels are complicit like this.

No doubt any employee who setup fake accounts or actually turned on the VW emissions cheat knew they were doing something wrong and you can prosecute them; especially if they didn't make any kind of fuss to management.

Yes, I've done things as well that are against policy; nothing illegal, but definitely against the companies stated policies. I'm not a saint here. I just raise my concern, if my manager tells me to do it anyways; meh... I'd rather keep my good job.

Re:The most outrageous aspect

[Tablizer]

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!

Re:The most outrageous aspect

[mr_mischief]

Identify theft by itself is technically a crime. Some customers got overdrafts because money was withdrawn from one account without their permission to be put into another account opened without their permission. It's at best fraud by Well Fargo against their shareholders because the number of active accounts was fake.

This goes back to at least 2001

[Sarusa]

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

[Kozar_The_Malignant]

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.

Re:They Knew

[whoever57]

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

Account 88888 at Barings bank.

Context tells more

[argStyopa]

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.

What percentage of WFB's accounts are fake?

[OrangeTide]

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.

Circa 2010

[TheHawke]

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.

The Blame Pyramid [Re:They Knew]

[Tablizer]

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, tell them not to, and fire them if they keep doing it!"

Level 3 Boss: "Then we wouldn't have any employees left because these are tough quotas."

Level 2 Boss: "I have full confidence in your ability such that I know you'll find a way to solve the wayward employee problem AND reach the sales quotas."

During a trial, the Level 3 Boss can say, "I asked my subordinate to solve the problem, and they didn't. It's not my fault: they failed to do their job."

A given level rigs it so that they get the credit for the good news and the level below them gets the blame for bad news. It's happened many time that if I build a great mouse-trap, my supervisors take the credit, and if something goes wrong (my fault or not), *I* get the blame. "Mr. Tablizer pushed the wrong button and F'd it up. I reprimanded that slacker." I've generally come to accept it as standard practice and psych myself up not to take the blame personally. I'm essentially a professional scapegoat/lightning-rod: go with the flow. (Sometimes I can trade being the scapegoat for more interesting projects as compensation. Fortunately I'm not in a sales-driven section for now.)

Plus, to compete with other cheaters at the same level, the bank employees also have to cheat. Thus, it's cheat or be fired to keep up with the cheating Joneses.

The top managers probably indeed know its a pressure cooker, but the problems of the pressures are aimed at and pushed on their underlings. The Blame Pyramid is carefully crafted that way. How do you objectively measure "unrealistic pressure"? Since cheating isn't tracked, they can claim they have no way to know if its a bank-wide problem. If they discuss it as a possibility, it's not written down.

Employees ordered to take the fall

[HalAtWork]

Wells Fargo management ordered employees to take the fall on this

These guys need to be strung up

Re:Employees ordered to take the fall

[HalAtWork]

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

It's not their only scam

[ausekilis]

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 bank is giving my money to some company I've never heard of for something I never signed up for. Doing a little research, you can get a refund... but you have to be persistent. I was offered $50, then $150, then told I could have an "elevation request" or whatever submitted on my behalf. So I did just that. A couple weeks later I got a credit back for over a grand. For them to keep my money, they would have had to prove that I signed up for this (and I use the term loosely) 'service'. I never did, so they had to pay up.