Wells Fargo and Whistleblowing

Wells Fargo and Whistleblowing

The basics of Wells Fargo’s history of opening unauthorized customer accounts is now well reported.  Beginning in 2005 Wells Fargo employees complained internally about fraudulent account activity.  In 2009, six employees were fired after complaining about unethical practices; they sued and their cases were settled in 2011.  In 2010 two more employees were fired and sued the bank alleging retaliation for their complaints about fraudulent and illegal activities.  In 2011, a branch manager reported falsified account documents to her district manager and was fired for inappropriate conduct. 

In December 2013, the Los Angeles Times reported, based on interviews with 35 current and former bank employees in nine states, that duplicate and unauthorized customer accounts were being opened so that employees could meet their sales quotas.  In July 2014, another employee filed a complaint that she suffered retaliation because she resisted opening unauthorized accounts.  In December 2014, the SEC began questioning the bank’s cross-selling practices.  In May 2015, a class action suit against Wells Fargo by a bank customer claimed that bank employees across the country had for years opened multiple accounts without customer authorization in order to meet sales goals.

In September 2016, Wells Fargo CEO Stumpf testified before Congress that about 1.5 million bank accounts – 2% of the accounts reviewed– and 565,000 credit card accounts may have been illegitimately opened.  About 115,000 of those accounts generated $2.6 million in fees for the bank.  He claimed that 5,300 bank employees – about 2% of the total – had been fired for “improper sales tactics” during the preceding five years.

That same month, the bank was fined $185 million by the Consumer Financial Protection Bureau (CFPB).  In addition, the bank paid $35 million to the Office of the Comptroller of the Currency and $50 million to the City and County of Los Angeles.  The bank’s Board took back $41 million in unvested stock options previously given to Stumpf and stopped his salary while they conducted an investigation.  Then, a month after selling $41 million of bank stock, Stumpf resigned as CEO, removing the sting from his sacrifice of stock options and salary.  The bank’s stock price dropped 18% from its May 2015 level, cutting its market capitalization by $50 billion.

In Senate testimony, Stumpf averred that the bank never directed its employees to open unauthorized accounts.  It did, however, emphasize the importance of encouraging customers to have, on average, eight accounts with the bank – memorialized in the bank’s slogan “Eight Is Great.”  Accounts would include checking, savings, CDs, funds, credit cards, lines of credit, mortgages, and online banking services, in individual or joint names.  Wells Fargo’s high-pressure sales culture was designed to convert that slogan into action and revenue.  But most people, especially those with limited funds, do not need eight accounts.  Personal bankers employed creativity and techniques learned from their peers to create job-saving accounts, leaving Stumpf and senior management to bask in plausible deniability.

Whistleblower lawsuits, such as those by Shankar, Tishkoff, Guitron, and Bado, describe individuals who resisted pressures to meet aggressive sales goals and were fired, not for objecting to illegal directives, but for unsatisfactory job performance.  Converting a whistleblower’s objection to wrongdoing into the basis for a termination for cause is commonly employed by companies in dealing with their whistleblowers.  And it was used by HomeFirst against me.

Dozens of the bank’s personal bankers and related managers became small-time whistleblowers who contributed to uproar, news articles, investigations, and lawsuits over the bank’s practices.  Still, thousands more have remained silent.  The bank’s employees had reasons not to blow the whistle that were similar to those that discourage other whistleblowers.  First, intent to commit wrong is difficult to prove in white-collar crimes like Wells Fargo’s.  When Stumpf proclaimed that “Eight Is Great,” he did not plan for his employees to violate customer expectations even if, under circumstances that he determined, that was the likely consequence.  Setting aggressive goals is arguably important to success, and Wells Fargo had been successful, even if it had to cut corners at times.

The primary intent of most organizational wrongdoers is not to break laws.  Not just rationalizing action after the fact, wrongdoers probably really do hope to benefit the company, they think their acts are actually quite innocent, or they believe they are (just barely) on the right side of the law.  The violations I alleged at HomeFirst all benefited the company, and the CEO’s reluctance to investigate them was based on a desire to help the company survive difficult times.  When I described to the HomeFirst Board how those violations were intentional, I could only rely on implication.  The Board members were not convinced and fired me a month and a half later.

Those reported problems to Wells Fargo’s HR department or via the bank’s ethics hotline often found themselves suffering retaliation shortly afterward.  Their complaints were seen as the frivolous claims of disgruntled employees who lacked the work ethic or skills needed in the bank.  Even federal agencies dismissed their complaints.

Then, Wells Fargo had special leverage over complainers: the form U5, a searchable database of reports on employees in banking where a “failure to perform duties” evaluation – a common company complaint about whistleblowers – can effectively kill other job prospects in the industry. 

Finally, there was little reason to expect the bank to change its practices in response to complaints.  CFO Sloan, who would become president in November 2015, told the LA Times in December 2013 that he was unaware of a problematic sales culture.  In its 2016 settlement with the CFPB, the bank avoided admitting any stated facts and accepting any legal guilt.  Through it all the bank voiced its commitment to accountability and customer service.

We whistleblowers are reluctant to call out our colleagues who most directly violate laws and contracts.  We go instead after managers who create the circumstances that drive employees to break the law.  But going after management may not solve anything: Stumpf resigned as Wells Fargo CEO, but he was replaced by Sloane who was even more directly responsible for policies that led to the offensive actions.

We also hesitate to take the most obvious step to address our personal situations: quit working for the wrongdoer.  It is pretty clear that Wells Fargo’s personal bankers were crazy to work there, whether or not they decided to become whistleblowers. 

For my part, I should have gathered evidence on what I thought were HomeFirst’s wrongdoings, blown the various whistles, and quit.  I had good reason to expect that HomeFirst would not change and it would eventually retaliate.  But I stayed, as did many of Wells Fargo’s personal bankers, hoping that I could squeeze a few more months or years from the job.  With or without justification, we fear that we cannot live as well as we’d like without our jobs.  If our employers are unethical, we think that we can benefit from that lack of scruples without being harmed ourselves.