Wells Fargo Agrees to Pay $3 Billion to Resolve Criminal and Civil Investigations into Sales Practices Involving the Opening of Millions of Accounts without Customer Authorization

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The Department of Justice has said that coordinated effort between the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office in Los Angeles has led civil agreement which will see Wells Fargo & Company and its subsidiary, Wells Fargo Bank, N.A., pay $3 billion to resolve their potential criminal and civil liability stemming from a practice between 2002 and 2016 of pressuring employees to meet unrealistic sales goals that led thousands of employees to provide millions of accounts or products to customers under false pretenses or without consent, often by creating false records or misusing customers’ identities. As part of the agreements with the United States Attorney’s Offices for the Central District of California and the Western District of North Carolina, the Commercial Litigation Branch of the Civil Division, and the Securities and Exchange Commission, Wells Fargo admitted that it collected millions of dollars in fees and interest to which the Company was not entitled, harmed the credit ratings of certain customers, and unlawfully misused customers’ sensitive personal information, including customers’ means of identification. U.S. Attorney Nick Hanna for the Central District of California said that the case is an illustration of a complete failure of leadership at multiple levels within the Bank. The civil settlement agreement entered into by Wells Fargo was under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) as a result of wells Fargo’s creation of false bank records.

The fraudulent practices engaged in by Wells Fargo is called gaming within the organization. The act includes use of existing customers’ identities to open checking and savings, debit card, credit card, bill pay and global remittance accounts without their consent. The call of some senior managers to question the implementation of the cross-sell strategy fell on the deaf ears of the management as some top managers were pressured to meet the goals of their unlawful and unethical gaming practice since 2002. Despite knowledge of the illegal sales practices, Community Bank senior leadership failed to take sufficient action to prevent and reduce the incidence of such practices.  Senior leadership of the Community Bank minimized the problems to Wells Fargo management and its board of directors, by casting the problem as driven by individual misconduct instead of the sales model itself.  Community Bank senior leadership viewed negative sales quality and integrity as a necessary byproduct of the increased sales and as merely the cost of doing business.
Before the government decided to enter into the deferred prosecution agreement and civil settlement a number of factors, including Wells Fargo’s extensive cooperation and substantial assistance with the government’s investigations; its admission of wrongdoing; its continued cooperation in the investigations; its prior settlements in a series of regulatory and civil actions; and remedial actions, including significant changes in Wells Fargo’s management and its board of directors, and enhanced compliance program, and significant work to identify and compensate customers who may have been victims.  The deferred prosecution agreement will be in effect for three years.