Wells Fargo

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Wells Fargo Ex-Employees:

Fired for Shunning Fake Account Scheme

| published September 25, 2016 |

By Keith H. Roberts, Thursday Review contributor

Wells Fargo, one of the largest banks in the U.S., remains in hot water with banking regulators and Congress for an unfolding scandal still reverberating through its halls, its call centers, and its local offices.

The Feds have fined Wells Fargo some $175 million for an allegedly ongoing scheme which encouraged employees to set up phony credit card accounts in the names of legitimate customers. All told, some 2 million fake accounts were created before the practice came to end this year. The costs of the bogus accounts were later passed along to customers in the form of hidden fees and charges added to the fine print of quarterly, semiannual or annual fees. The vast majority of customers were unaware of the phony accounts.

Wells Fargo, which is cooperating with banking regulators in Washington and in California—where the bank is based—says it has put a halt to the program, ended incentives for employees to create new accounts, and fired more than 5,300 employees. It also says it will no longer encourage its bankers to push the sale of products or services its customers do not want, and blames many of the dismissed workers for fostering the internal culture of competitive sales.

But some of those employees have been telling the press that they weren’t fired for their participation in the fake account schemes, but were—in fact—terminated for refusing to set up phony accounts. And in some cases, those employees were fired because they raised red flags along the way, suggesting that the internally-driven scheme was unethical.

Wells Fargo officially dismisses such claims. The bank says it dismissed those thousands of employees in order to take proactive measures in the midst of the scandal; but some media organizations looking closely into the pattern of hiring and dismissals have concluded that Wells Fargo is not being completely transparent about the reasons people were fired. Those same analyses also raise questions about the time frame involved with those dismissals. Some Wells Fargo insiders say that included in the 5,300 number were people simply let go as part of routine layoffs in some specific parts of the company; others still were dismissed for reasons unrelated to the credit card scandal.

In fact, a few of the California bank regulators investigating the scheme say that Wells Fargo is using the “5,300” figure as a way to demonstrate the appearance of house-cleaning and retribution, though in fact relatively few people have been dismissed because of the scandal.

But according to several former Wells Fargo employees interviewed this week by CNN, they were fired specifically for their unwillingness to set up fake credit card accounts. Those employees, which number about a dozen, confirm what has already been widely disclosed in the scandal—that intense pressure was brought to bear internally to “cross-sell,” the process of getting existing customers to open up additional accounts or accept additional banking products. When customers balked at establishing new lines of credit, many Wells Fargo employees were encouraged by supervisors to create phony accounts using the existing information of those customers. But those ex-employees say that in their cases they were fired after refusing to go along with the scheme, or after they failed to meet specific sales quotas imposed by managers and supervisors.

On Friday, two former high-ranking employees filed suit in Los Angeles superior court, alleging that the bank fired them specifically for their failure to achieve high quotas in an internal campaign to get as many customers as possible to sign up for credit card accounts. Attorneys for Alexander Polonsky and Brian Zaghi say that they were under intense, constant pressure by senior managers to meet “impossible quotas” which in some cases and in some markets was dozens of sales pitches each day, and a goal of up to eight products or accounts per household.

Polonsky and Zaghi say that Wells Fargo is being patently dishonest when it now claims to federal and state regulators that it never officially sanctioned the internal campaign to generate as many accounts as possible.

Other employees have filed suit in other jurisdictions, claiming that they were unfairly fired for the improvised process of creating phony accounts, suggesting that scores of supervisors and managers were fully aware that thousands of employees were using existing customer data to create fake accounts as a way to meet the impossible demands of the sales goals set by district or regional managers. In at least two of the lawsuits, former employees allege that regional managers would require employees who failed to meet the demands of the grueling quota system to work long hours, often at night and on weekends—without pay—in an effort to make up for flagging numbers.

Polonsky and Zaghi say that their dismissals were meant as a signal to other Wells Fargo employees to shape up or face similar fates, and that employees who fell short of the sales demands must turn to the process of setting up those now infamous phony accounts.

A week ago, Wells Fargo CEO John Stumpf faced tough questions from members of the Senate’s Banking Committee, which bore down on the practice of cross-selling, especially when the cost of such misfires can include the creation of millions of phony credit card accounts—an obvious security risk in a world in which hackers can use any credit card or debit card for fraudulent purposes. Both Democrats and Republicans also grilled Stumpf about the fees and charges passed along to existing customers.

Senators also wanted to know why some senior Wells Fargo execs were allowed to retain bonuses given as a direct result of those draconian sales quotas, even as rank-and-file employees were fired during the same period.

Security experts and consumer groups have raised still another potentially deeper problem from the Wells Fargo scandal: millions of customers whose credit scores have been adversely impacted by attempts to open unneeded accounts under their names and using their private information (social security numbers, addresses, phone numbers, income totals). According to spokespersons for Experian, credit reporting agencies often immediately record any newly created or newly-requested account on a person’s credit report; a predominance of unneeded or unwarranted accounts can often lead to a measurably lower score.

Those lower scores may come as a surprise to those same customers when they are ready to purchase a car or a home, and millions of such adversely-effected scores could have a collectively bad effect on the economy.

Meanwhile, that lawsuit in California may be just the opening salvo in what could become a messy legal quagmire involving various former employees, as well as a vastly expensive process for consumers. Hints that other big banks may have engaged in similar, albeit smaller scale, campaigns of cross-selling worry some banking analysts who see problems for consumers in all 50 states—especially if it turns out that even more average consumers were impacted by the creation of fake credit card accounts.

The suit filed by Polonsky and Zaghi suggests that the pressure from within was widespread and fostered a culture in which sales became king. Their suit alleges that low-pay employees were deliberately pressed into the business of creating fake accounts in order to feed a system of upper-level bonuses and promotions, with little regard for what would happen to those rank and file employees when the meltdown finally came.

Wells Fargo now says it has cleaned up its act internally, fired those responsible, and promised to prevent future fiascos. Stumpf told the Senators that he alone bears full responsibility, and he assured those Senators that his bank will no longer foster an atmosphere where employees feel pressure to push customers toward products they do not need.

Related Thursday Review articles:

Wells Fargo Faces Penalties in Wake of Banking Scandal; Thursday Review staff writers; Thursday Review; September 9, 2016.

A 1936 Book Explains Why Wal-Mart Will Have a Bad Year; R. Alan Clanton; Thursday Review; October 28, 2015.