Wells Fargo was the world’s most valuable bank until 2016, when it slipped into second place behind
JPMorgan Chase. It may also be one of the biggest criminal enterprises in
American history.
I’m not the only one who
thinks so. Harold Meyerson, executive editor of the American Prospect, began an
op-ed in the Los Angeles Times last month: “What’s the biggest criminal enterprise
in California? MS-13? The remnants or successors to the Crips and the Bloods?
The Mexican Mafia? If we’re talking about the sheer volume of offenses, the
answer is clear: Wells Fargo.”
Not just journalists. New
York Congressman Gregory Meeks told CEO John Stumpf at a Congressional hearing a year ago that Wells Fargo “basically has been a
criminal enterprise”. Meeks said, “I’ve got individuals right now on the
street, they’re not back in their homes,” because of fraudulent mortgages.
Would Wells Fargo put his homeless constituents back in their homes? Stumpf had
no answer.
Wells Fargo employees created
3.5 million fraudulent accounts in customers’ names without their knowledge. The bank
signed up 500,000 customers for online bill payment services without their
knowledge, some of which carried fees. It charged military personnel illegally
high interest on loans and then seized vehicles from soldiers who fell behind on their payments. It charged half a million auto loan customers for insurance that they did not need. About 20,000
people could not pay these extra fees, went into default, and had their cars repossessed.
The bank didn’t only cheat
its customers. Wells Fargo paid $100,000 to settle a class action suit in 2009
by its employees in Nevada, who were mislabeled “managers” so they would not
have to be paid overtime and then forced to work
unpaid “call nights” to drum up more business. A branch manager was fired in 2010 when he reported these criminal actions to
his supervisors. The bank was ordered this year to pay him $5.4 million in back
pay and compensatory damages. One manager notified the bank’s confidential
ethics hotline about fraudulent activity in September 2011 and was fired later that month. A banker in Pennsylvania also called the hotline and
sent an email to human resources about the unethical practices he was told to
perform in September 2013. Eight days later he was fired.
Wells Fargo has committed
these crimes for at least 15 years. And company leaders knew it. Internal
complaints were made as early as 2005. In
2009, six fired employees sued, alleging unethical practices. Employees wrote
directly to CEO John Stumpf as early as 2011. In 2013, the
New York Times reported that Wells Fargo employees were under intense pressure,
including threats of getting fired, if they did not meet ambitious goals by
opening accounts and starting credit cards without permission. Complaints were
made to managers and nothing was done.
If somebody uses someone else’s personal information to open a credit
card account, the penalties are severe. Ordinary crime. Our customary language
puts Wells Fargo’s actions in a different light: white-collar crime, which the FBI defines as “characterized by deceit, concealment, or
violation of trust and are not dependent on the application or threat of
physical force or violence.” The escape from any jail time or criminal record
of every participant except one banker after the bank collapse and financial crisis of 2008 shows how our
society excuses big crimes when they are committed by rich, usually white men
in fine suits.
But some other definitions might be more appropriate for Wells Fargo’s
actions. The crimes of so-called “organized crime”
are defined clearly. Extortion, a time-tested endeavor of organized crime, is
the acquisition of property through the use of threats or force. Didn’t Wells
Fargo threaten homeowners and car owners with seizure of their property if they
didn’t pay illegally created charges? And then make good on those threats?
Loan-sharking is the provision of loans at illegally high interest
rates accompanied by the illegal use of force to collect on past due payments.
Didn’t Wells Fargo charge illegal interest rates to soldiers and then forcibly
take their property?
Wouldn’t Wells Fargo fit the FBI’s definition perfectly? “The FBI
defines a criminal enterprise as a group of individuals with an identified hierarchy, or comparable
structure, engaged in significant criminal activity.”
What price has Wells Fargo
paid for their millions of individual crimes? Virtually none. The few hundred
million dollars that Wells Fargo has paid in fines or has promised to pay
customers who were cheated are a tiny fraction of the $11 billion in profits
for just the first six months of 2017. Wells Fargo says it will refund nearly a
million dollars to customers who had been signed up for online bill payment –
that’s less than $2 per fraudulent transaction.
Wells Fargo’s chief executive
after 2007, John Stumpf, was publicly rebuked in a congressional hearing in
2016, had to resign, and forfeited $41 million in stock options. That left him
with Wells Fargo stock worth almost $250 million.
Carrie Tolstedt, leader of the community banking division, where these criminal
actions occurred, had to “retire” at age 56, and lost $19 million. She had made
$27 million in her last three years, and took with her a mere $125 million
in stocks. Earlier this year, four second-level executives were fired. Nobody has done a day of jail time.
After years of intense
pressure on employees to get new accounts any way they could, Wells Fargo fired
5300 employees for unethical behavior. The company leaders walked away with
millions of dollars.
That criminal enterprise was
too big to jail. Our political and judicial systems seem inadequate to protect
ordinary Americans from corporate crime or to punish criminals when they are
caught.
Can we, the people, do
something? Wells Fargo customers could simply switch banks. There is no big
advantage in using a giant global bank. My local Jacksonville bank performs all
the services I need, whether I’m at home or across the world.
A survey in October 2016,
just after the scandal made headlines, showed that only 14% of
Wells Fargo customers had decided to leave. It’s not so easy. Most people get
multiple services from their bank, including loans, automatic bill pay, and
credit cards. Switching takes time and money, and many customers don’t have either. One third of
Americans with savings accounts have a zero balance. Although the number of new
credit card and checking accounts fell by half earlier this year, that still
means that thousands of people were opening new accounts with Wells Fargo.
Other corporations are happy
to take tainted money from Wells Fargo. The bank will now be a sponsor of the
annual football rivalry between Oregon and Oregon State. Wells Fargo signed an extension of its deal as
official retail bank of Major League Soccer, and became an official partner of the NFL Los Angeles Rams.
Since the beginning of 2017,
Wells Fargo stock has fallen about 10%. Don’t buy their shares. TV viewers could tune out the
Wells Fargo golf championship, broadcast every May, forcing the tournament
organizers to find another sponsor, and avoid other sporting events and
programs sponsored by Wells Fargo.
Not very satisfying. But if
we don’t say no to white-collar criminals, who will?
Steve Hochstadt
Springbrook WI
September 10-12, 2017
not accepted for publication by the Jacksonville Journal-Courier
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