Background
One of America’s top banks Wells Fargo is slated to pay over a billion dollars to to settle the charges tied to their mortgages and auto lending businesses. The bank will pay 500 million dollars to the Office of Comptroller of Currency & 500 million dollars to the Consumer Financial Protection Bureau (CFPB).
Surprising to most that this sort of a decision is passed even though banks have enjoyed looser tax regulations & lower tax rates. A decision on the Wells Fargo case was impending. A strict decision was expected, but something that makes the case for history books has happened here. This is the first time that an amount of this magnitude will be levied by the CFPB from any bank.
The customers however, shall not receive a single penny out of the 1 billion dollars. The bank is taking care of the reimbursements to be doled out to the customers. Trump commented in a tweet about being harsh on companies if found cheating hinting towards the Wells Fargo Scandal.
The ruling comes as a result of the concession made by Wells Fargo that it had sold insurance to its auto customers even when they did not need or demand for it.The case has set a precedence in the Trump era where it was believed to be the good time for banks in USA while he is in the office, there is nothing that will spare them if they commit mistakes.
The Issue
In 2005, an employee called Hambek received a complaint from Bill Moore regarding him of having opened a savings and a checking account. The check by Hambek clarified the matter as the accounts had been open on Jan 1,2000 the day on which Washington State Department of Licensing remains shut.
A similar story panned out for a young banker called Yesenia Guitron who mentioned the daily ritual of a huddle meeting before the daily rigor of the job at Wells Fargo. The goal at Wells Fargo far before Guitron arrived in 2008, had been “Straight Eight” set by Dick Kovacevich. Eight because it rhymed with straight & the term was invented as Wells Fargo had been the bank that believed in the cross-selling of products and services to their clients.
Guitron was Spanish, she entered during the tragic year of 2008 Recession, a number of people mostly of whom spoke Spanish in the area she served approached the bank for a similar problem for services and accounts that they had not authorised. Imagine a place where there lived 11,000 people & the daily sales call target of the firm is 12,000.
The cut throat corporate sales culture is what led to the demise of the entire bank later. On an average thus based on the above calculation , 3000 more accounts on a daily basis need to be created/forged/dealt with. Without a iota of doubt, there will be duplicity in accounts & total corruption.
Both Hambek & Guitron had approached the Wells Fargo Ethics team with multiple emails that mentioned the system of gaming that prevails within the organization. Guitron took the matters further to senior executives & Managers. They were completely hand-in-glove with the fraudulent company culture & fired Guitron as obviously she couldn't become one of them & indulge in the trickery of sorts.She made several calls to the Wells Fargo Ethics Line in 2010 & 2011 , most of the times with answers such as there is no issue of this sort, the company officials & senior management is completely aware of the correctness of the system at Wells Fargo…so on & so forth.
Julie Tishkoff, an assistant to a regional Wells Fargo President in 2005 ,alleged of fraudulent practices such as passing off signatures & deleting of those records a day before the Audit arrived by shredding them. The lid finally blew off when a customer named David Douglas filed a lawsuit against the bank calling them guilty of creating 8 accounts, none of them were authorized by him. This began the chain of events that unearthed the massive deceitful culture of cheating ingrained in Wells Fargo to achieve targets.There are no two ways to this, if the targets to be achieved are unrealistic & way beyond the standards of the competition at hand, people will find a way to game the system. It is the responsibility of the upper management and executives to make sure that the company is not drawn to such mannerisms.
The scale of the fraud is opening of 1.5 million deposit accounts & 565,000 credit card accounts which are not authorized by their customers. They indulged in “pinning” of customers which means to authorize pins to the customers without their knowledge and impersonating them. In addition to all of this mud-hole, the employees created 195,000 non -employee accounts to make matters worse.
Imagine breeding an entire generation of employees on a flawed ethos, there is no coming back from such a system. If you achieved your target, everyone knew how & why, yet most kept mum and tried doing it better. It is sort of the mob mentality, where being in the mob gives you power, the power to be there with the group that wields this sort of clout over 6000 branches across America. The power to be supported by your CEO throughout the journey.
My Take
ETHICS — this six letter word has become far too important today than any other time in History. We are making the greatest machines & the most awe-imagining technologies that mankind has seen, yet time & again we deify companies so much that they dictate terms, harm their own customers & are too big to be controlled. There is no doubt at the Wall Street that Wells Fargo turned out to be one of the same breed, corrupt & much like a lot of others.
What shocked everyone was 3 generations of CEO being involved in the scandal & nobody spoke a dime about it. What are our schools teaching today, whom do we listen to, who are our leaders, what do they teach in the Ivy-League schools in America & the top institutions across the world that time and again pose a blatant question of moral & character in front of us.It is well beyond time, we start thinking over it.
