Millions of Fake Accounts That Drowning and Burying Wells Fargo PDF

The Fake Accounts of Wells Fargo
Millions of fake accounts that drowning and burying Wells Fargo

Wells Fargo already playing its 'Get Out Of Jail Free' card to avoid lawsuits over fake accounts ..... 1
The Leadership Blind Spots at Wells Fargo ........................................................................................ 4
DoJ Opens Investigation Into Wells Fargo Fake Accounts; Why Top Execs Are Responsible .......... 8
The Wells Fargo Fake Account Scandal: A Timeline ....................................................................... 20
Shareholder Revolt At Wells Fargo -- The Threat Of The Choice Act ............................................. 22
Wells Fargo, Awash in Scandal, Faces Violations Over Car Insurance Refunds .............................. 24
Wells Fargo uncovers up to 1.4 million more fake accounts ............................................................. 27
Why Wells Fargo Might Not Survive Its Fake Accounts Scandal .................................................... 29
That Wells Fargo fake account scandal is way worse than you thought ........................................... 31
Wells Fargo finds an additional 1.4 million potentially fake accounts .............................................. 33
It's been a year since the Wells Fargo scandal broke - and new problems are still surfacing ........... 38
Wells Fargo's fake-account scandal leads to credit downgrade ......................................................... 42
A Timeline of Wells Fargo's Sales Scandal ....................................................................................... 44
Wells Fargo CEO Sloan to be grilled by Congress ............................................................................ 50
Senate Small Business Committee Presses Wells Fargo CEO on Account Fraud Scandal ............... 52
Comparing Bank Of America, Wells Fargo And JPMorgan Chase .................................................. 54
Senate Committee Eyes Wells Fargo Scandals' Potential Impact On SMBs ..................................... 57
Key Talking Points............................................................................................................................. 59
The DFA of UDAAP: Unfair, Deceptive, Abusive Acts and Practices ............................................. 62
retail banking, individual banking, consumer banking, mass banking, wholesale banking,
community banking............................................................................................................................ 63
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Saturday, 30 September 2017

20161208 01 Wells Fargo already playing its 'Get Out Of Jail Free' card to avoid lawsuits over fake
accounts
2017-09-30 03:37 AM
http://www.ieyenews.com/wordpress/wells-fargo-already-playing-its-get-out-of-jail-free-card-to-
avoid-lawsuits-over-fake-accounts/
http://bit.ly/2fGCH01
Wells Fargo already playing its 'Get Out Of Jail Free' card to avoid lawsuits over fake
accounts
By Chris Morran From Consumerist
December 8, 2016
Wells Fargo is facing multiple lawsuits from customers and employees over the long-running fake
account fiasco that saw more than two million bogus, unauthorized accounts being opened in
customers' names. Even though lawmakers and consumer advocates have repeatedly asked the bank
to not sidestep its liability by using an often-ignored clause in its customer agreement, lawyers for
Wells Fargo have already begun to play that "get out of jail free" card.
Wells - just like most major banks, telecom and cable companies, online retailers, and electronics
manufacturers - includes a forced arbitration clause in its consumer contracts. These clauses do two
things: First, they prevent the customer from bringing a lawsuit through the legal system. Instead, any
dispute can be shunted off into private arbitration. Second, and more importantly, they prohibit
similarly wronged customers from joining their complaints into a single class action - even through
arbitration.
Thus, rather than having a handful of named plaintiffs representing an entire class of harmed
individuals, each wronged customer must go through arbitration on their own. That might be worth
the effort if your individual claim is substantial, but in many class actions the rewards for a single
class member are often small; however the total damages for the company can be huge.
The purpose is to hold the wrongdoer accountable financially and to do so in a public forum, so that
any additional information that might be brought to light does not remain hidden in a file cabinet
somewhere. As a result of this high-effort, low-reward system, only a small number of potential
plaintiffs ever enter into arbitration - the overwhelming majority of bank customers don't even know
that they have signed away this right to sue.
When Wells Fargo acknowledged that its employees had been gaming the bank's sales quota and
incentives system by opening and closing millions of fake accounts in existing customers' names,
lawmakers directly asked then-CEO John Stumpf if Wells planned to play the arbitration card to
compel the inevitable class actions out of court and into discrete arbitration disputes.
Stumpf declined to say yes or no, but the answer was pretty clear when he responded that he had
"instructed my team to do whatever it takes, within reason, to take care of these customers," and that
he would discuss the issue with his legal team. In response, a coalition of senators wrote to Stumpf,
calling on him to rethink this tactic, arguing that the lack of transparency surrounding closed
arbitration hearings "helps hide fraudulent schemes such as the sham accounts at Wells Fargo from
the justice system, from the news media, and from the public eye."
More recently, members of both the House and Senate introduced the Justice For Victims Of Fraud
Act, which if passed would forbid Wells from compelling these disputes into arbitration. However,
the bank has already begun the process of diverting these lawsuits out of public view and dividing
them up into individual arbitration disputes.
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In November, the bank filed a motion to compel arbitration [PDF] for the 80 plaintiffs in a class action
filed in a Utah federal court. The bank successfully used a similar tactic to break up a May 2015 class
action lawsuit filed more than a year before Wells Fargo ever publicly admitted to the fake account
fraud.
In Sept. 2015, a full year in advance of Wells' $185 million settlement with state and federal
regulators, the court granted [PDF] the bank's motion to compel that case into arbitration. This week,
the New York Times reported on more of the bank's efforts to keep these lawsuits out of the
courtroom, even though there is no dispute that Wells Fargo employees opened these unauthorized
accounts.
"It is ridiculous," one of the named plaintiffs in the Utah lawsuit tells the Times. "This is an issue of
identity theft - my identity was used so employees could meet sales goals. This is something that
needs to be litigated in a public forum." Wells claims that arbitration is a "last resort," in spite of the
fact that it's asking for these cases to be dismissed only weeks after they have been filed.
"We want to make sure that no Wells Fargo customer loses a single penny because of these issues,"
explains the bank in a statement to the Times. While making customers whole again is a positive step,
it doesn't address the potential punitive aspect of a class action, wherein the bank would be made to
feel the sting of its bad practices by having to publicly admit culpability.
"I think it's a major problem when you have a bank that is so large, doing the things that Wells Fargo
did on a systematic basis, to be able to keep that under wraps," explains one lawyer representing a
Wells customer whose case was forced into arbitration. This afternoon, Senators Patrick Leahy (VT)
and Sherrod Brown (OH) wrote to new Wells Fargo CEO Tim Sloan expressing their disappointment.
"Wells Fargo's demand to deny defrauded customers their fundamental rights demonstrates your
complete failure to understand the gravity of the company's actions and an utter unwillingness, despite
promises to the contrary, to actually put your customers first," reads the letter [PDF], also signed by
Sen. Al Franken (MN), Sen. Elizabeth Warren (MA), Dick Durbin (IL), and Richard Blumenthal
(CT).
"Forced arbitration denies Americans their constitutional right to seek justice in a court of law and
shields companies from accountability - both from the courts and the public eye," continue the
senators. "We will not simply trust you to get this right as long as your actions continue to belie your
words. We will not forget that your company has harmed millions of Americans. We will continue to
watch closely and hold you accountable at every misstep.We strongly urge you to reconsider your
use of forced arbitration."
For more on this story go to: https://consumerist.com/2016/12/07/wells-fargo-already-playing-its-

get-out-of-jail-free-card-to-avoid-lawsuits-over-fake-accounts/
most major banks, telecom and cable companies, online retailers, and electronics manufacturers
https://consumerist.com/2016/08/03/from-credit-cards-to-mail-order-steaks-87-companies-that-are-
taking-away-your-right-to-sue/
overwhelming majority of bank customers don't even know that they have signed away this right to
sue https://consumerist.com/2015/03/10/banks-credit-card-companies-saving-millions-by-taking-
away-your-right-to-sue/
asked then-CEO John Stumpf if Wells planned to play the arbitration card
https://consumerist.com/2016/09/20/wells-fargo-ceo-stumpf-admits-he-learned-of-fake-accounts-in-
2013/
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a coalition of senators wrote to Stumpf https://consumerist.com/2016/09/23/senators-to-wells-fargo-

ceo-dont-strip-wronged-customers-of-their-day-in-court/
introduced the Justice For Victims Of Fraud Act https://consumerist.com/2016/12/01/proposed-
justice-for-victims-of-fraud-act-would-take-away-wells-fargos-get-out-of-jail-free-card/
PDF https://consumermediallc.files.wordpress.com/2016/12/fargoarbcompel.pdf
May 2015 class action lawsuit https://consumerist.com/2015/05/14/class-action-suit-filed-in-
california-over-wells-fargos-alleged-customer-account-abuses/
Wells' $185 million settlement with state and federal regulators
https://consumerist.com/2016/09/08/wells-fargo-on-the-hook-for-185-million-for-opening-
unauthorized-accounts/
PDF https://consumermediallc.files.wordpress.com/2016/12/calcompel.pdf
New York Times reported on more of the bank's efforts to keep these lawsuits out of the courtroom
http://www.nytimes.com/2016/12/06/business/dealbook/wells-fargo-killing-sham-account-suits-by-
using-arbitration.html?ref=business
<hr>
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20161008 02 The Leadership Blind Spots at Wells Fargo
2017-09-30 03:42 AM
https://hbr.org/2016/10/the-leadership-blind-spots-at-wells-fargo
http://bit.ly/2dDmIfX
Ethics
The Leadership Blind Spots at Wells Fargo
Susan M. Ochs, October 06, 2016
oct16-07-528840881
The post-scandal scrutiny of Wells Fargo's culture has so far focused on the high-pressure sales
environment that drove employees to create as many as two million fake accounts. Former employees
have alleged a "soul-crushing" culture of fear and daily intimidation by managers, where they were
pressured to reach extreme sales goals, some by breaking the law.
The bank has since fired 5,300 employees for the illegal behavior and eliminated retail bank sales
goals entirely. As a result of this fraud, the bank is now being investigated by Federal prosecutors and
Congressional overseers. The states of California and Illinois and the city of Chicago have also
suspended parts of their business relationships with the bank.
But the fallout is far from over. Hearings last month before the Senate's banking committee and the
House's Financial Services Committee point to further dangerous cultural dynamics inside Wells
Fargo. The grueling testimonies from CEO John Stumpf, coupled with insights from my industry-
wide research into the culture and mindsets of bankers, suggest there is a blind spot among senior
leaders at Wells Fargo, as well as deterrents to speaking up among the rank and file. Along with fixing
the sales culture, the bank will have to address these critical management issues to prevent the next
scandal.
A blind spot among senior leaders
Despite five years of explicit and repeated warnings, the executive team and the board of directors
were remarkably slow to see the breadth and gravity of this fraud, and to address it effectively.
According to Stumpf's testimony, a board committee became aware of the fraud "at a high level" back
in 2011.
They had a fuller discussion in 2013-2014 - around the time when media reports of the illicit behavior
first surfaced. Although roughly 1,000 employees had been fired each year since 2011 for these
practices, the board only became "very active" on the issue in 2015. Stumpf testified that he personally
became aware in 2013 when, after two years of ineffective solutions within the business unit, the
volume of fake accounts was still increasing.
It was yet another two years before Stumpf brought in consultants in 2015 to investigate the full scope
of impact on consumers. In examining what took them so long to react, Stumpf's comments portray
a leadership team that refused to believe the sales fraud could be systemic in a culture such as theirs.
Founded in 1852, Wells Fargo and its trademark red stagecoach aim to evoke the values of
plainspoken pioneers and a simpler time. The bank proudly held itself apart from its New York-based
peers after the financial crisis and regularly touted its "culture of caring." The public believed it, rating
the brand far more trustworthy than any of its peers of a similar size.
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Executive team members, most who have spent decades at the company, concluded this fraud had to
be minor isolated incidents. During both Congressional hearings, Stumpf kept repeating that the
firings totaled only 1% of headcount per year, and that only 1.9% of deposit accounts could be
fraudulent.
He also said, "I've always knownthat not everybody will do it right every day," trying to rationalize
this as the work of rogue bad actors and a predictable part of doing business, as opposed to a systemic
failure. Wells Fargo leaders also seem to be blind to the significance of this crisis - both for consumers
and for its own culture.
Stumpf noted that initially, the bank didn't realize customers could be charged fees for these fake
accounts, but said, "when we finally connected the dots on customer harm in 2015, the board was
very active on this." This statement implies that the only impact on consumers is monetary: wrongful
fees.
When the bank thought thousands of employees were simply violating consumer trust - stealing
identities, forging signatures, secretly moving money - that wasn't enough harm to provoke the board's
active involvement. This misjudgment (perhaps initially due to management downplaying the
incidents) could explain why the board got engaged so late in the process, and why they did not
impose penalties on executives until after the first scathing Congressional hearing and weeks of public
outcry.
Senior leaders were so focused on financial impact that they couldn't see the ethical damage. Even
now, Stumpf adamantly refuses to hear criticism of the bank's culture. Instead, he called this an
operations and compliance issue, perhaps not realizing that both of those functions influence
corporate culture.
When "operational issues" like extreme sales goals help create a certain mindset - in this case, the
belief that successful managers must push employees aggressively - that mindset will endure, even
after the bank removes those sales goals. It's not unusual for a CEO to view the organization's culture
more favorably than average employees do.
But Stumpf's high opinion of the Wells Fargo culture seems to be unwavering despite consistent
evidence to the contrary. Pushing back against members of Congress last week, he asserted, "the
culture of the company is strong" and is "based on ethics and doing what's right." By the end of the
hearings, Members were calling him "tone-deaf" and "in denial."
Deterrents to speaking up
This leadership blind spot is the result of misguided reverence for their culture and its ability to
inoculate the bank from systemic problems. It represents a governance breakdown of the highest order
for executives and board members. But it appears that some red flags never even reached them:
Investigations revealed the bank has ignored, discouraged, and even fired employees who tried to
voice concerns about the intimidating culture and unethical practices. In the worst cases,
whistleblowers claim they were fired after reporting violations to the bank's ethics hotline or trying
to alert supervisors to illegal behavior.
Concerns raised by other employees were reportedly ignored, including an alleged email sent to
Stumpf directly, and a petition, signed by 5,000 colleagues, that sought to lower sales quotas and
combat unethical conduct. Stumpf called the firings "regrettable" and assured Congress that the bank
has a policy of non-retaliation against whistleblowers.
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S3ra Sutan Rajo Ali
But the damage goes beyond the employees who were terminated - it sends a signal to everyone else
that they should keep quiet. At best, problem-raisers will be ignored; at worst, they will lose their
jobs. Why risk it? If the bank doesn't care, why should they? This is one of the most dangerous
dynamics to afflict a financial institution.
Following the 2008 crisis, regulators have prioritized a healthy banking culture, anchored by
"effective challenge," meaning when people question ideas or escalate problems, they are heard and
welcomed, without fear of reprisal. In a large organization, successful risk management requires all
hands on deck. Employees should feel not only comfortable but also accountable for speaking up.
Wells Fargo is creating the opposite environment - where employees are discouraged from caring or
challenging anything. In addition, a more implicit deterrent to speaking up may be permeating the
organization. During his testimony, Stumpf interrupted a detailed exchange saying, "I care about
outcomes, not process." If this mentality pervades the bank, it could exacerbate an existing industry
bias.
For many in finance, projecting an aura of self-reliance is part of what garners respect. In my research,
the mindset, "My boss would judge me poorly if I had to ask for help instead of solving an issue on
my own," is especially prevalent among midlevel and high-level bankers. It is also correlated with a
tolerance for rule-breaking, which perhaps is the extreme last-recourse solution for the lone wolf.
Given this predisposition, when subordinates hear the CEO cares about end results, not the details of
getting there, they may be even more reluctant to come forward with problems or seek advice on
process points along the way. This could have contributed to the years of delay in rooting out the
Wells Fargo sales fraud.
For the bank, any obstacles to speaking up - whether deliberate or inadvertent - must be eradicated.
That starts with listening to and protecting the employees who raise concerns. And managers at all
levels must take explicit steps to encourage questions and collaborative problem-solving. It's
important to care about how things are done, not just the end results.
The problems from blind spots at the top and stifled voices within the ranks will not disappear when
sales goals do. Without doubt, there are many great people working at Wells Fargo, and they deserve
better. Senior leaders need to see the truth about the bank's culture and engage all employees in the
effort to repair it.
Susan M. Ochs is a senior fellow at the think tank New America, where she directs the Better Banking
Project. She is a former senior advisor at the U.S. Department of the Treasury.
post-scandal scrutiny https://hbr.org/2016/09/wells-fargo-and-the-slippery-slope-of-sales-incentives

"soul-crushing" culture http://www.npr.org/2016/10/04/496508361/former-wells-fargo-employees-
describe-toxic-sales-culture-even-at-hq
eliminated retail bank sales goals entirely http://financialservices.house.gov/uploadedfiles/hhrg-114-
ba00-wstate-jstumpf-20160929.pdf
investigated by Federal prosecutors http://www.wsj.com/articles/federal-prosecutors-investigating-
wells-fargo-over-sales-tactics-1473881424
suspended parts of their business relationships http://www.reuters.com/article/us-wells-fargo-
accounts-chicago-idUSKCN1251Y5
Senate's banking committee
http://www.banking.senate.gov/public/index.cfm/hearings?ID=B80F9B81-4331-4F95-91BC-
718288EC9DA0
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House's Financial Services Committee

http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=401082
my industry-wide research http://www.newamerica.org.s3-website-us-east-
1.amazonaws.com/economic-growth/inside-the-bankers-brain/
media reports http://www.latimes.com/business/la-fi-wells-fargo-sale-pressure-20131222-story.html
brought in consultants http://financialservices.house.gov/uploadedfiles/hhrg-114-ba00-wstate-
jstumpf-20160929.pdf
culture of caring https://www08.wellsfargomedia.com/assets/pdf/about/corporate/vision-and-
values.pdf
far more trustworthy
https://assets.aspeninstitute.org/content/uploads/files/content/upload/DNA%20of%20Trust%20in%
20Banking_0.pdf
minor isolated incidents http://www.wsj.com/articles/wells-fargo-ceo-defends-bank-culture-lays-
blame-with-bad-employees-1473784452
more favorably http://howmetrics.lrn.com/wp/wp-content/uploads/2016/05/HOW-REPORT-5-6-
16.pdf
whistleblowers http://money.cnn.com/2016/09/21/investing/wells-fargo-fired-workers-retaliation-
fake-accounts/
petition http://www.nydailynews.com/news/national/wells-fargo-employee-petition-protesting-
ethics-suit-article-1.2814693
effective challenge https://www.federalreserve.gov/bankinforeg/srletters/sr1107.htm
<hr>
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20160915 03 DoJ Opens Investigation Into Wells Fargo Fake Accounts; Why Top Execs Are
Responsible
2017-09-30 03:49 AM
https://www.nakedcapitalism.com/2016/09/doj-opens-investigation-into-wells-fargo-fake-accounts-
why-top-execs-are-responsible.html
http://bit.ly/2fERjNy
DoJ Opens Investigation Into Wells Fargo Fake Accounts; Why Top Execs Are Responsible
September 15, 2016 by Yves Smith
Wells Fargo CEO John Stumpf may come to regret believing his own PR. The bank chief backed
himself into a corner by insisting that the creation of over 2 million of bogus customer accounts over
a four year period was the doing of a whole posse of rogue employees, no one had any incentives to
do bad stuff, Wells has a perfectly upstanding corporate culture and senior management had no idea
what these bad apples were up to.
And Stumpf was so confident that this scandal would blow over that he managed to let the executive
who supervised the operation in question retire while the settlement talks with regulators and the Los
Angeles City Attorney were at an advanced stage, with her nearly $125 million payday intact.
But now the Department of Justice, and critically, the elite Southern District of New York (along with
the Northern District of California) are in the early stages of an investigation. As the Wall Street
Journal, which broke the story, reported:
While in early stages, the investigation by federal prosecutors is focusing on whether someone
senior within the bank directed employees to falsify documents in conjunction with the opening of
accounts and products without consumers' knowledge or authorization.
Prosecutors are also focusing on whether there was willful blindness to sales practices on the part
of executives at the bank, these people said.
The fees generated by this brazen fraud were chicken feed, a mere $2.4 million, which means that
was not the point of this exercise. The object was to meet targets so that the bank show continued
growth in the number of accounts and in the average number of products sold per account, both of
which were metrics the bank touted with analysts.
In other words, the targets were the mechanism to drive staff to show numbers to analysts to keep
Wells' growth story alive and well. And they delivered! Too bad the numbers were sometimes lacking
in substance. In other words, senior management benefitted directly from this chicanery, far more
than branch staff did (although keeping from being fired for not meeting your goals is plenty
motivating).
The story that Stumpf is peddling to the media, and presumably to the DoJ and the Senate Banking
Committee, is that employees were gaming the system. Adam Davidson, the Lord Haw-Haw of the
1%, dutifully chimes in to claim that it's impossible "for a large bank to monitor every one of its
quarter million employees," when in fact it was doing just that with the staff in question as far as their
sales metrics were concerned.
The reason this scandal has gotten traction is that it is obvious that a supposedly well run bank could
not miss the creation of millions of phony accounts, particularly when many had clearly bogus Wells
Fargo e-mail addresses like 1234@wellsfargo.com, noname@wellsfargo.com, or
none@wellsfargo.com.
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Reader Clive describes how banks, even back to the stone ages of paper-based systems, had checks
to catch instances of employees selling customers bank services they hadn't intended to buy. Hoisted
from comments (emphasis original):
Opening up fake products to claim a sale is a trick which goes back to when a TBTF tried to sell
Noah Ark insurance. When I started in retail at a TBTF nearly 30 years ago, senior management (as
a minimum the VP or equivalent in charge of a geographical area) would get reporting from the
internal compliance or risk function about the number of accounts opened which had low turnover.
A low turnover account is a serious red flag for either mis-selling or even (as was the case that has
been exposed at Wells') the salesforce boosting their figures by robo-applications. It was easy enough
(and sufficiently widespread there were operating procedure to check on it) in the days of paper
applications.
You'd just, during the course of a sales interview, present the customer with another thing to sign,
usually at the end when they wanted to leave, in a flurry of other paperwork that needed them to put
pen to paper.
With digital fulfilment of many retail products in branch (sorry, I should say "store" if we're talking
about Wells Fargo shouldn't I) it is even easier. You walk the customer through a myriad of screens,
let's say for a loan application. The CRM [customer relationship management] system will already
have been spamming the bank employee and the customer to sell them anything and everything else
they're eligible for.
If, for example, they are pre-approved by their FICO score for a credit card product with a line of
credit built in already, it's often enough to just tick a box on screen to complete that product sale as
part of the sales process for the loan. At the end, the printer will spew out a load of paper for the
Terms and Conditions, the product details and (if required) a space for a signature. If a (as in my
illustration) credit card product has been added, and the bank employee doesn't tell the customer then
it is highly likely the customer won't be aware.
If they notice later, maybe when they're back home filing the documentation, they may think to
themselves "oh, that's a mistake, I didn't ask for that" and make a mental note to contact the bank to
tell them and maybe cancel the product. They'll more than likely forget or have better things to do
with their time.
Even if they do make that call, they'll get put through to the "customer retention" team who will
try their level best to talk them out of cancelling the product. Of course, it all comes out in the wash
eventually - the customer didn't want the product in the first place and if they didn't want it, they
almost certainly won't use it. This will result in a low (or no) activity account.
Simplistic attempts are generally made in the bank's operations to prevent this kind of sales
practice. The most common is that if within in a certain timeframe (a month or 6 weeks is usual) there
hasn't been a transaction on the account or the card hasn't been activated, the account will be closed
and this low activity account sale will be clawed back from the salesforce.
But of course, this is widely known in the bank employees, so the standard ruse is to diarise a follow-
up customer service call, tell the customer some cock-and-bull story about how the bank employee
has noticed a potential security issue with one of their cards and could they phone the security team
just to confirm the card is still in their possession.
Or another variation is to tell the customer If they want to call into the branch, they can sort the
"problem" out, while in the branch they get the customer to phone the activation line, then "check"
everything is okay by doing a cash advance at the counter on the card (they'll even refund the fee,
how kind!).
These are just some tricks, readers can get the gist of how it works and probably even think of their
own alternatives. But there's still a trail of evidence which the bank should be following - accounts
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S3ra Sutan Rajo Ali
which are very light in transactions after 6 months or dormant in a year. These are always investigated,
not for the customer's benefit but because it costs the bank money to maintain the account.
They are invariably force-closed due to low activity (this will be in the product's standard Terms and
Conditions, to give the bank the ability to do this). This management information is collated and
picked over endlessly by the P&L accountants. Too many customers attracted to the brand, sold
product to, but who then walk away are value-destructive.
Senior management (one part of the senior management team, anyway) are all over this metric like a
rash. Of course, another "arm" of senior management - those who's bonus is simply determined by
sales volume, not long-term profitability - don't care and unless the one at the top (and I do mean the
top, the CEO is the only one who can wield the big stick in this sort of management turf war) has his
or her finger on the pulse and determines to stop the rot, the rot will go on and get rottener and rottner
until the stench (the stinkyness being the Average Revenue Per Customer declines) becomes too
obvious to ignore.
Notice the key issues here:

1. Because maintaining accounts costs money, banks close accounts with low activity. In other
words, if industry-standard procedures were in place, the bogus accounts at Wells should have been
flushed out pretty quickly. That in turn would result over time in the staff members and branch
managers who opened up too many dodgy accounts getting dinged.
While that may have happened at Wells (as in it is conceivably true that they fired 5,300 employees
for opening fake accounts), this was at a scale that it was an ongoing issue that it was never cleaned
up because it benefitted management. In other words, the individual and branch targets were so high
that they required cheating to meet them, as reports from ex employees indicate.
But rather than lower the targets to something achievable, Wells instead churned employees who did
what they felt they had to to keep their jobs, and kept the bezzle of the fake accounts going in their
reports and analyst calls.
2. Retail banking at large institutions is run through metrics, all the way down to the employee
level. It is inconceivable that senior management didn't see the increase in low/no activity to total
accounts while this con was underway. That means they were actively complicit.
The Department of Justice should not find it all that hard to establish senior management culpability
if they are serious about this case. The SEC and DoJ have been reluctant to use Sarbanes-Oxley-based
theories of action, but this would seem to be an ideal situation, since both the CEO and CFO
repeatedly certified the accuracy of financial reports and the adequacy of controls.
Sarbanes-Oxley was drafted so as to facilitate cases that were launched as civil actions to easy be
flipped to criminal cases if discovery unearths serious enough dirt. I hope the lawyers in the
commentariat will discuss what other angles the DoJ might pursue, in addition to securities fraud.
However, given the proximity to the elections, Wells management would normally regard time as its
friend and will do everything in its power to drag the investigation out, on the assumption that changes
in personnel in the Administration and the DoJ will work in their favor. But investors and the board
may not tolerate having the sword of Damocles of a possible criminal case hanging over the bank for
long. Stay tuned.
which broke the story, reported http://www.wsj.com/articles/federal-prosecutors-investigating-wells-

fargo-over-sales-tactics-1473881424
for a large bank to monitor every one of its quarter million employees
http://www.newyorker.com/business/currency/the-record-fine-against-wells-fargo-points-to-the-
failure-of-regulation?mbid=rss
10
many had clearly bogus Wells Fargo e-mail addresses

https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rPxi_pVaKx2Y/v0
vlade September 15, 2016 at 7:05 am

"although keeping from being fired for not meeting your goals is plenty motivating" this is another
fascinating example of upstair-downstair differences we're starting to see more and more.
When you're downstairs, "not meeting your goals" means you get fired.
When you're upstairs, "not meeting your goals" means you get smaller bonus.
Elasmo Branch September 15, 2016 at 10:52 am

"Not getting caught acting like an embezzler [or a stagecoach bandit, eh Wells Fargo?] in front of the
entire nation" is one of those C-suite goals that may be just shy of being met. Looks like it's time for
another restructuringoh, wait. At least the bazillion Federal wire fraud counts, prima facie, will
mean serious consequences forumat least the BSA/AML's Suspicious Activity Reports really
broke this wide-oreally? Not a one?
Yves Smith September 15, 2016 at 7:23 am

The obvious person to string up is someone we've mentioned in earlier posts, Carrie Tolstedt, the
head of community banking during the entire period of the fraud. She curiously retired at the end of
July, which could either mean the regulators and Los Angeles City Attorney got her head (but not
nay of her $125 million vested/deferred comp payout) but Wells negotiated that this be kept under
wraps, or more likely, that she decided to get out while the getting was good. Making Tolstedt the
most senior target would mean that no current exec at Wells would suffer.
voteforno6 September 15, 2016 at 8:55 am

If that's the case, then she would have to be willing to "take one for the team," wouldn't she? I think
it was suggested elsewhere on this site that she might be able to tie this to senior executives at the
bank. If so, then what is her incentive to play ball, if the feds come after her? My guess is, whatever
penalties she faces will be nothing more than a slap on the wrist, which will keep most of her fortune
intact.
Someone should go to jail for this, but it won't happen because the Justice Department under Obama
has shown a remarkable aversion to locking up white collar criminals. Unlike a lot of street gangs, no
banker will take the rap to protect higher-ups, if jail is threatened. This investigation is nothing more
than a publicity exercise, because they have to show that something is being done.
Of course, I could be wrong. The optimist in me is hopeful that the hammer will fall on senior execs
at Wells Fargo. We'll see.
diptherio September 15, 2016 at 9:24 am

That's my take too. It's all kayfabe. Lynch won't go after the criminals any harder than Holder did,
which is to say not at all. The DOJ is a partner to the fraudulent bankers, not a check on them. I'd
have though we'd all have that figured out by now.
Valuationguy September 15, 2016 at 12:22 pm

While normally I would agree with your 1000% that Lynch and the DoJ will piss and moan about an
investigation.the factor that is NOT being mentioned in the discussion is that Wells DOESN'T have
the teflon 'get out of jail' free card that all the other money center banks do. In many ways it is the
political outsider at the party.
For examplehow many Wells Fargo alumni do you see in gov't? Compare that to all the other
money center banks and you will get an idea of the position of weakness that Wells finds itself in. Its
expertise is retail banking.not investment bankingand it has managed to keep up the growth
through acquisition and expanding its retail operations (partially through overly aggressive (and
illegal on occasion)) sales tactics.
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S3ra Sutan Rajo Ali
Wells upset the entire financial community (and specifically gov't bureaucracy and FED officials)
when they bought Wachovia during the 2008 financial crisis despite Hank Paulson trying to use
Wachovia to prop up the failing Citigroup. The New York financial crowd has never forgotten or
forgiven Wells for standing up to the financial powers that be and taking Wachovia's assets away
from the Wall Street mafia. (I personally think Wells drank from a poisoned goblet by acquiring
Wachovia but it has paid off in this environment of TBTF)
I spent over a decade at Wells Fargo (laid off 5 years ago btw so I'm no major fanboy)and while I
would freely admit that there are some bad apples there (finance attracts alot of flies)I would stand
up Wells employees and their business culture up against ALL of the other major money center banks.
$2.5M in extra fees charged to customers on 2 million unauthorized/fraudulent products sold over an
8 year period AND the bank can show it fired 5,300 people for it BEFORE getting their dirty laundry
aired in public??
Frankly that should probably be considered pretty good compliance. (I'm not excusing the
fraudbtwbut 100% compliance is impossible.) Goldman and JP Morgan Chase cheat that much
out of clients in a period of 15 secsbased on the implications I take from their SEC and DoJ
settlements over the past year.and have directly fired HOW MANY for fraudulent paperwork or
representation of deals to other investors?
Regardless.the reason that Wells is getting the media raking over the coals is because they have
been the most highly reputable bank that all their competitors hate and envyand its easy and fun to
drag down the guy who's been doing the right thing (most of the time).than to raise the game against
the major criminals.
PS - I do think Stumpf needs to offer to resign.but if I were on the BoD I wouldn't accept it. I think
the Consumer Banking gal who retired will get part of her bonus clawed backbut certainly not all
That said.her (and other executives' ) compensation IS obscene.
flora September 15, 2016 at 4:13 pm

adding: imo, the banks have gotten away with victim blaming for years. Wells is getting media
attention because it's impossible to pass off this fraud as the fault of the victims.
Valuationguy September 16, 2016 at 10:42 am

My comment is
1) that due to lack of political patronage.YESWells Fargo is much more likely to be prosecuted
that the other money center banks.
2) that the behavior which Wells Fargo is being criticized for in this article (i.e. opening accounts and
providing new products to customers) IS EXTREMELY SMALL POTATOES compared to other
abuses and actually reflects pretty good compliance since Wells actually caught it internally and fired
the people who got caught doing it. (We can argue the merits of the high pressure sales tactics and
culture separately from the actual fraudulent actions.)
These abuses include the very one that Yves mentions in a subsequent post: rampant mortgage
foreclosure documentation fraudwhich is still ongoing in my opinion. Since Wells is the largest
playerit is undoubtedly one of the guiltiest players there courtesy of the Golden State and Wachovia
(and other subsequent) acquisitions which changed the old style retail banking culture at Wells to
something more attuned (but not fully attuned) to Wall Street banks.
I'm not defending Wells as lily white (there are no banks I have found which are not guilty of taking
advantage of customers when they can.law or no).and I total agree with Yves about the mortgage
fraud problem (at Wells and all other money center banks). However the perception (rightly or
wrongly) has been that Wells is the most reputable player.and everyone below loves to knock the
king off their throne.
Frankly.if Wells were being raked over the coals for their mortgage foreclosure practices.I
wouldn't be posting..as they would deserve to be thrown to the wolves for it.but the media is
instead raking Wells over the coals for actually taking the correct actions for the situation that
12
occurred (admitting guilt, repaying the defrauded customers, paying a much higher penalty than the
direct damages caused, AND getting rid of the sales incentives that led to the abusive behavior.)
Compare that to any of the other settlements you have read about concerning the Wall Street money
center banks over the past 8 years.
flora September 16, 2016 at 11:04 am

Wells employees opened millions of fake accounts in the names of real customers to meet sales goals.
Sales goals that were unrealistic, but served to up metrics that benefited the c-suite guys. And
management knew nothing about this? Doesn't pass the laugh test. Maybe Wells is too big to manage
properly.
Maybe Wells needs to be broken up into more manageable sized spin-offs. Maybe a few c-suite execs
need to face prosecution. As a deterrent to others. After all, the bad incentives are still in place at
Wells. The suggestion that Wells wasn't the worst so should get a pass isn't a legal standard, as far as
I know.
Valuationguy September 16, 2016 at 3:17 pm

I don't disagree that sales goals may have been unrealistic.but that isn't a criminal offense. Its
the individual performing the fraud that are guilty.not the ones that set up the environment in which
the EMPLOYEE FEELS (!!) they were 'driven' to break the law.which is where we seem to
disagree.
NOTHING DROVE them to break the law but their OWN PERSONAL INCENTIVESnot
management's incentives. Employees who broke the law felt they could do so and not ultimately face
the consequences of itor they would have quit. As Dumbledore stated in Harry Potter.individuals
have the choice on whether to do what is right or what is easy.
Quitting a job where you feel you are pushed to break the law to meet their monthly performance
requirements isn't EASY.but it's the RIGHT thing to do. As a result of enough people quitting, the
employer EVENTUALLY gets the message (via lost profits based on high employee turnover) to
change their expectations.
OR THEY choose to eat the turnover costs. Pushback is a normal and welcome feedback mechanism
especially in the job market. (This whole media episode is a good example of the pushback and costs
it can ultimately impose.as Wells will pay heavily in lost customers over the next
month.including my accounts)
And I'm not suggesting Wells get a PASS.I'm saying that the media is actively trying to make a
mountain out of THIS ISSUEwhile ACTIVELY and DELIBERATELY ignoring the continuing
(going on a decade) erupting volcano of fraud in mortgage banking for example. a typical
diversionary tactic by current mainstream media to hide the most important problems no one wants
to address.
Yes.what Wells employees did was badand management needs to realize that (and why
employees felt they HAD to do it).so some coverage is deservedbut Congressional hearings?
Sigh..someone needs to prioritize issues facing the country better. Who knows.maybe the
mainstream media will do its job for once and uncover proof that management knew its requirements
was resulting in fraud of its customers and actively encouraged employees to engage in fraud.
(Something I highly doubt given the training programs designed to discourage this) At that pointI
may eat my words. BTW - I happen to personally agree with you that ALL the money center banks
(and the regionals) should be broken upincluding Wells.as they ARE too big to effectively
manage with any real accountability.
Yves Smith September 15, 2016 at 5:03 pm

I call bullshit. The reason Wells appeared better than the other TBTF banks is retail banking is more
tightly regulated than capital markets activities, where the rules assume customers are better able to
watch out for themselves. Their business mix gives them less opportunity to misbehave. You must
not have worked in the mortgage area.
13
S3ra Sutan Rajo Ali
Wells' conduct was worse than that of other banks (foreclosure fraud abuses) because they were more
systematic about it and had far fewer excuses (i.e., acquiring banks that had missing records). For
instance, we had whistleblowers tell us how banks were cheating on the Independent Foreclosure
Review.
BofA went through the motions (surprisingly elaborately) and then had higher level reviewers fudge
the results which Wells basically lied flagrantly about their entire process.
Valuationguy September 16, 2016 at 10:46 am

Yves, I don't disagree with you in the slightest regarding Wells behavior in the mortgage
arena.please see my comment reply to flora above. I appreciate your efforts to bring some reason
to the industry.
Clive September 15, 2016 at 10:35 am

They're effectively dilutive. The options aren't bought in the open market then handed to the execs.
Newly-minted shares are created for the purpose of allocating them as a bonus. So it looks as if there's
no up-front cost. Of course, each new share created increases the total pool of issued share capital so
any EPS is automatically lowered.
In theory, if the execs' interests are truly aligned to the rest of the stockholders', it should be all good,
the corporation gets to pay bonuses out of "free" money, everyone else benefits from either increased
return on their investment and/or stock price increases. Of course, as here, the execs were seemingly
working a classic looting scam - setting a measure for triggering the bonus (cross-selling rates) which
they could easily game
("sell or you're fired" message to employees, who, shock-horror, then proceeded to do made-up sales,
aforementioned execs didn't then go looking for the problem and, amazingly, you'd-never-have-
guessed, then failed to find it).
The whole measure which decided the level of the bonuses was phony. As a minimum, the
shareholders in Wells Fargo should fire the compensation committee members for allowing it in the
first place. A "sale" is worth diddly-squat if that sale doesn't generate a profit (the amount you earn
from that sale must exceed the Cost of Goods Sold ("COGS")).
The measure should have been profitability per product measured over something reasonably like the
long-term (e.g. 5 to 10 years). This wouldn't be perfect, but would be a lot better than the bonus
scheme in Wells Fargo for the retail c-suite. Using long-term profitability is also a good idea because
it stops the other abuses such as cutting back on essential investment to flatter short-term results.
It's easy to goose apparent profitability by sweating the asset base. But you're just storing up trouble
and some expensive bills for later, those maintenance and asset-quality chickens always come home
to roost eventually. Buffet piffles on about such things endlessly in his hammed-up Berkshire
Hathaway newsletter. He's another one who, to quote what Yves said about Stumpf, has apparently
been believing in his own PR.
Dean September 15, 2016 at 7:56 am

It's disappointing that the C-suite certification of controls and financials hasn't been used more by
prosecutors.
To wit:
new accounts are a metric reported to Wall Street (presumably to analysts and in the body of their 10
K/Q)s;
new accounts were being fabricated; and
WF admitted to and settled these allegations.
Will Obama's Justice Department do just enough (splashy headline backed up by spin and optics) to
deflate the marginal Sanders voter's angst by November? You bet.
Will a fine be extracted from the bank? No doubt.
Will the bank's executives have to worry about their year-end bonuses? Nope.
Will an executive be indicted? I'm not holding my breath.
14
Mike G September 15, 2016 at 6:49 pm

show continued growth in the number of accounts and in the average number of products sold per
account, both of which were metrics the bank touted with analysts. 95% of management in corporate
America is making The Numbers look pretty. Like propaganda, the bogus numbers aren't designed to
fool critical examination but to give moral cowards an excuse not to think too much about them.
Executives and Wall Street anlaysts both pretend the numbers are real, and everyone who matters
makes money.
reslez September 15, 2016 at 1:30 pm

When I was in school my first year accounting prof told us that WF was the worst bank to do business
with. He had so many horror stories from his clients.
Otis B Driftwood September 15, 2016 at 8:25 am

I wonder about the notion that anyone could hope for a more friendly DoJ or Administration than
what's now in place. These are the same folks who, promising "Hope and Change", proceeded to sit
on their collective hands in the aftermath of one of the biggest financial frauds ever. That's a fairly
low bar, isn't it?

"The Department of Justice should not find it all that hard to establish senior management culpability
if they are serious about this case." I'll be watching this case with great interest. Thanks for your
reporting.

adding: "both of which were metrics the bank touted with analysts. In other words, the targets were
the mechanism to drive staff to show numbers to analysts to keep Wells' growth story alive and well."
Ah, metrics.
Old metric: ROI -Return on Investment. A performance measure used to evaluate the efficiency of
an investment or to compare the efficiency of a number of different investments.
New metric: ROT - Return on Treachery. A performance measure used by c-suite officers to evaluate
the efficiency of a treachery or fraud, or to compare the efficiency of a number of different frauds.
polecat September 15, 2016 at 12:05 pm

Why not just do away with all the pretense and refer to the above agency as 'the Dept. of Grifting'
! wouldn't that be a more honest decription ? the DOG
LA Mike September 15, 2016 at 10:10 am

Since when is theft and fraud not a crime? Since TBTF! But I have a more serious question, one
which I've had since this story broke. Does this actually fall under SOX? I see that Yves made
reference to it and I trust her judgment. But my understanding is that SOX is more about the financials,
and to an extent, internal control over them, than it is a culpability of all behaviors throughout the
institution.
(From a financials standpoint, this matter is fiscally immaterial, though not immaterial in terms of
reputation and PR.) For example, a WF branch employee punches a customer. Is the CEO culpable?
Of course not, though WF itself could be sued. So where does the opening of fake accounts fall
between this battery example and an misrepresentative Income Statement? Does SOX apply?
Does the SEC have oversight over this sort of conduct? (I'm squarely in the camp of those who believe
Stumpf and everyone down knew about these practices. That's a separate issue.)
divadab September 15, 2016 at 12:27 pm
15
S3ra Sutan Rajo Ali
As Yves noted earlier, it's an internal control fraud. That is, the fake accounts were set up by
overcoming normal internal controls - all of them, including management oversight controls. This
falls squarely in the realm of SarbOx - as both the CEO and CFO must certify that internal controls
both exist and are functioning - which they clearly were not in this case.
Both CEO and CFO are personally liable to ensure they have evaluated internal controls - that's why
they are required under SarbOx to certify them.
Dean September 15, 2016 at 9:31 pm

There's a nuance: internal controls over financial reporting which includes disclosures made in their
periodic SEC filings. Internal controls over compliance, for example, while vital, do not fall under
SOX. My belief is if new accounts were reported as a metric in their periodic filings, then there is a
connection to SOX.

Thanks, Dean. I'm concerned that this issue isn't as clear cut as divadab is making it out to be. I'm
hoping Yves might chime in on this.
Yves Smith September 16, 2016 at 5:50 am

I have a colleague who has been a Sarbanes Oxley compliance expert at two TBTFs and some smaller
financial concerns who begs to differ. There are two Sarbox certifications made by the CEO and CFO,
one for the accuracy of financial information, the other over internal controls, as you acknowledge.
The control issues include explicitly "expenditures and liabilities incurred for illegal purposes" and
activities to boost income and "Fraudulently obtained revenue and assets and/or avoidance of costs
and expenses" that can result in reputational loss (see p. 76: https://www.protiviti.com/en-
US/Documents/Resource-Guides/Protiviti_Section_404_FAQ_Guide.pdf). For a large bank, the
internal controls certification also includes risk controls.

Perfect. Thanks, Yves.

Yves: I see the connection. But there is another nuance I'd like to raise: that of materiality. A control
weakness did exist but the next step is to evaluate the weakness in terms of financial impact to the
financial statements. I don't know the dollars involved with respect to fees earned or dollars expended
to obtain new accounts.
I'd hazard a guess these dollars would not be material to Wells and therefore not a significant
deficiency or a material weakness, merely a deficiency. Granted this is a narrow internal controls
view of things.
Where a stronger control claim could be made in my opinion is in the weak control environment -one
of the five COSO components evaluated for SOX- (tone at the top, incentives, code of ethics) and
poor risk assessment practices -another component- not understanding what could go wrong with
their incentives and mandates to create new accounts.
In my opinion this is where the reputational and legal risk lay-leading to fines and penalties. I believe
this connection is the strongest claim for a SOX line of inquiry. Don't get me wrong: I want to see a
successful SOX prosecution. I just think focusing on the dollars involved (a narrow view of account
fees earned and costs incurred) is not the angle because it's not material.
It's broader and more meaningful to go after the true rot: the incentive driven culture, tone at the top,
and the lack of imagination (or willful avoidance?) by not wondering "what could go wrong with this
program?"
16
Another add: I will cede the point there is no materiality when it comes to illegal activities. However,
all there is a right now is a settlement. There have been no convictions (yetnot holding my breath)
so the 'funds expended on illegal purposes' would not appear to apply, especially since they bank
admitted to no wrongdoing. The bank did promise to change its sales culture as a result of its
settlement. This is an admission the control environment (culture, tone, incentives) was flawed.
Bottom Gun September 15, 2016 at 10:39 am

This is the DOJ's modus operandi - old, old US government techniques applied to a new situation.
You know, for obvious reasons, during the Second World War, one of America's most important
strategic goals was to screw up the railway system across Europe. Broadly speaking, there were two
ways to do this. One involved P-38s.
They was unquestionably effective, but had significant drawbacks. Air raids put precious pilots and
expensive airplanes at risk. Moreover, the Germans necessarily knew right away exactly where and
how the damage had been done. To pursue the other approach, the Office of Strategic Services put
together a short masterpiece called the "Simple Sabotage Field Manual" and put it in the hands of
covert operatives dropped into occupied Europe. (Conveniently, it was declassified in the spring of
2008.)
A few of the many sage bits of advice for American sympathizers working, for example, in railway
management:
Insist on doing everything through "channels." Never permit short-cuts to be taken in order to
expedite decisions.
Be worried about the propriety of any decision - raise the question of whether such action as is
contemplated lies within the jurisdiction of the group or whether it might conflict with the policy of
some higher echelon.
Advocate "caution." Be "reasonable" and urge your fellow-conferees to be "reasonable" and avoid
haste which might result in embarrassments or difficulties later on.
To lower morale and with it, production, be pleasant to inefficient workers; give them undeserved
promotions. Discriminate against efficient workers; complain unjustly about their work.
Act stupid. (This is a direct quote.)
This approach has several advantages over the P-38 method: the damage is not clearly obvious or
even provable. The risk to American lives and property is greatly reduced. Well executed, it still
snarls the movement of supplies and troops to the front in France. And P-38s could not drop
paychecks to American sympathizers at Deutsche Bahn or promise them a corner office after the war.
The weakness and ineptitude of DOJ, and the dearth of banker prosecutions, makes much more sense
if you know this story.
Dogstar September 15, 2016 at 10:48 am

I had a troubled friend that got tangled up with methamphetamines. She supported her habit by getting
personal info on her victims, then going around opening instant-approval store credit cards in their
names. Then she'd return for cash or sell online. She did 2 years in prison for identity theft. Not sure
how all these fake accounts can go unpunished.
allan September 15, 2016 at 11:05 am

To quote Charlie Chaplin from Monsieur Verdoux:
Wars, conflict, it's all business. "One murder makes a villain. Millions a hero". Numbers sanctify.
One case of ID theft or wire fraud and they throw the book at you. Two million and they book you
on CNBC.
Clive September 15, 2016 at 11:43 am

"Sign-up was so confusing and tedious" That was a feature, not a bug ! And as you proved, these
"cross sales" are worthless. Actually, they're less than worthless, they are costs, pure and simple.
17
S3ra Sutan Rajo Ali
As an indicator (sorry, I don't have U.S. figures, but they'll not be hugely different), issuing a credit
card (production of the plastic, account goods, welcome pack, setting up the account on their hosting
system) is around 7-10+/-'ish depending on the issuer's cost base. If Wells' costs for that card they
bestowed on you was less than $10, I'd be staggered. Repeat that a couple of million times or so, and
soon you're talking about real money.
readerOfTeaLeaves September 15, 2016 at 12:30 pm

Clive, I've really appreciated, and learned a lot from, your comments. I was trying to translate
'$125,000,000' for that retired Wells Fargo's salary into 'the percentage of my local public school
district budget for 2016': it came to 50%. My local suburban school district's 2016 budget for 20,000+
kids (including non-English speaking, severely disabled) comes to USD $242,000,000 - or half what
Wells Fargo paid a single banking exec.
My school district appears to be vastly more economically productive than Wells Fargo; they sure
accomplish a hell of a lot more with far, far less money.
allan September 15, 2016 at 12:57 pm

Former Bankrate executives must face SEC fraud lawsuit [Reuters]
http://www.reuters.com/article/us-sec-bankrate-idUSKCN11L246
Two former Bankrate Inc (RATE.N) executives failed to persuade a federal judge to dismiss U.S.
Securities and Exchange Commission claims that they fraudulently manipulated the consumer
financial information provider's results to meet Wall Street forecasts. U.S. District Judge Gregory
Woods in Manhattan on Thursday said the SEC may pursue all its claims against former Chief
Financial Officer Edward DiMaria, and all but one claim against former Director of Accounting
Matthew Gamsey.
The SEC accused New York-based Bankrate, which reached a $15 million settlement last September,
and the executives of using questionable accounting to boost revenue and understate expenses for the
second quarter of 2012. It said that in once instance, DiMaria threatened to "rip (the) head off"
Bankrate's top credit card executive if $500,000 of improper revenue were not booked, while Gamsey
reacted to an instruction to book that sum and $300,000 of insurance revenue by writing "seriously -
oyyyyyyyyyyyyyy."
Both defendants said the accounting entries were immaterial and that the SEC did not show they
intended to commit fraud. But Woods said it was premature to infer that DiMaria was "merely
pushing" his employees to portray Bankrate's performance in the best positive light. "DiMaria's
alleged conduct crosses the line from corporate officers' common practice of taking affirmative action
to meet revenue, earnings, or profit estimates, to consciously, falsely creating the appearance that
Bankrate was meeting its targets when he knew that was not the case," Woods wrote.
So, in this judge's opinion, `merely pushing' your employees isn't enough - you have to be
`consciously, falsely creating the appearance [of] meeting [your] targets'. The case against WF, if
there ever is a case, might be based on a different legal theory, but this does sound like a steep wall
for the prosecution to climb. Any smart CEO knows how to act dumb and not leave a paper or email
trail.
Kris Alman September 15, 2016 at 3:26 pm

"Retail banking at large institutions is run through metrics, all the way down to the employee level."
"Accountability" is for mere mortals. Executives aren't even accountable to shareholders these days.
The metric trap has ensnared physicians. This trap creates a greater doctor-patient divide when
perverse incentives are created and doctors are employed by large corporations.
In health care, Kaiser Permanent has long spun their "bonuses" as "at risk compensation," which vests
physician shareholders into the corporate culture. (In order to become a shareholder, a physician must
be board certified in the specialty in which the physician practices, and work a minimum of 24 hours
per week.) http://businesspractices.kaiserpapers.org/articlek.html
18
Obamacare's Accountable Care Organizations have picked up on this trick. For example If there
are new evidence-based guidelines to decrease any "unnecessary" imaging (as was true in Oregon in
2012), all you have to do is jack up the out-of-pocket costs and voila! I pointed out that the metric for
my ordering physician wouldn't capture my refusal to get an MRI of my spine-not because our
insurance didn't cover it, but because I knew it was a worthless test.
But if a poor person really needs the test, it's likely that it's not gonna happen.
https://www.oregon.gov/oha/herc/EvidenceBasedGuidelines/Guideline%20for%20Advanced%20I
maging%20for%20Low%20Back%20Pain.pdf Similarly, doctors are measured on how well they get
patients to comply with preventive testing. But if all the tests in the world can be done for "free," it's
a cruel irony if the patient can't afford the subsequent care.
LAS September 17, 2016 at 11:07 am

Likely no one will read this b/c it is a late entry however, as an executor of my father's estate,
some years ago I called this same bank to close my father's accounts as he had died and the money
been transferred out elsewhere leaving a zero balance. What I expected would be a call of 1 minute
duration turned into this protracted 20 minute experience in which the bank rep introduced all sorts
of reasons why the accounts should not be closed, including how there were store card incentives
which could be earned by keeping it open.
Their incentives were of no interest to me but still I could not prevail on them to close the accounts.
Best I could achieve after 20 minutes of argument was getting them to freeze the accounts. Ever since,
once a year, they mail me a statement reporting zero funds and zero activities. I've often wondered
why they keep up the sham of mailing an annual statement when they're earning nothing from these
accounts.
Rick September 17, 2016 at 1:29 pm

The article doesn't really explain the incentive mismatch between duping analysts in the short term,
and execs receiving RSU's.
Yves Smith September 17, 2016 at 4:19 pm

The issue isn't stock grants, it's 1. the overall comp philosophy (what percentile v. the peer group has
Wells' board set as it target, and how the board determines how well the execs have done) and the
issue highlighted in the article we featured on CEO pay, that the pay measure that the SEC highlights
in its Summary Compensation Table greatly understates CEO pay because CEOs are able to create
and take advantage of short-term favorable moves in stock prices, as in they recognize a short term
super favorable blip for what it is and cash in option or sell stock then.
Rick September 17, 2016 at 9:20 pm

I'll give you the first part in theory-that's maybe there is an incentive to be blind to fraud if it can get
you a raise. Except, now Carrie Tolstedt is out of a job she could have had for nine more years. Safe
to assume she will earn less at her next venture. But the latter-what? These execs are ignoring fraud
in order for the potential to swing trade their extra shares-after they vest three years later?
This is first undermined by the fact that company was aware of the issues of fake accounts as
demonstrated by the 5300 employees who were fired over the course of five years. If executives
approved of such practice, why would they fire people on an ongoing basis? 2- Is there actual evidence
of insider sales that correspond with analyst forecasts (timed perfectly for sec approvals too), prior to
missed earnings? Seems highly improbable. And why did the SEC miss this? Or did they have some
incentive to ignore it as well?
<hr>
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S3ra Sutan Rajo Ali
Thursday, 28 September 2017

20170428 04 The Wells Fargo Fake Account Scandal: A Timeline
2017-09-28 11:40 AM
https://www.forbes.com/pictures/ejhj45fjij/where-wells-went-wrong/#35993fed54b4
http://bit.ly/2yIcBP4
The Wells Fargo Fake Account Scandal: A Timeline
Christopher P. Skroupa
2017-04-28T12:12:04-04:00
https://specials-
images.forbesimg.com/imageserve/57ea9774a7ea430a8a1a4456/800x0.jpg?fit=scale&background=
000000
https://specials-
images.forbesimg.com/imageserve/57ea979e4bbe6f24d1f8adb7/800x0.jpg?fit=scale&background=
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Where Wells Went Wrong
On September 8, 2016, Wells Fargo announced that it was paying $185 million in fines to Los
Angeles city and federal regulators to settle allegations that its employees created millions of fake
bank accounts for customers. The bank wanted the issue behind them. But instead, the settlement
sparked a firestorm. Here's a look at a timeline of the fallout.
https://specials-
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"Eight is Great"
The fraud appears to have stemmed from CEO John Stumpf's mantra to employees: "eight is great."
Meaning: get eight Wells Fargo products into the hands of each customer. But this directive proved
burdensome for bank employees as they struggled to meet demanding quotas and satisfy even more
demanding managers. They began to cut corners and opened deposit accounts and credit cards for
Wells customers - without their knowledge or permission.
https://specials-
images.forbesimg.com/imageserve/57ea977631358e16c589fa01/800x0.jpg?fit=scale&background=
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Two Million Phony Accounts
From 2011 to mid-2016 - but possibly going back to 2009 or before - Wells employees created more
than 1.5 million unauthorized deposit accounts and issued more than 500,000 unauthorized credit
card applications. These accounts racked up $2.6 million in fees for the bank.
https://specials-
images.forbesimg.com/imageserve/57ea9778a7ea430a8a1a445c/800x0.jpg?fit=scale&background=
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$185 Million In Fines
These sham accounts may have gone unnoticed were it not for a 2013 L.A. Times investigation that
helped uncover the fraud. The reporting led to a 2015 lawsuit against Wells Fargo by the city of Los
Angeles. Soon thereafter, federal regulators got involved and on September 8, 2016, Wells Fargo
announced that it was paying $185 million in fines to city and federal regulators to settle the matter.
Bank executives wanted the issue behind them.
20
https://specials-
000000
Slammed By Jack Lew And Elizabeth Warren
The $185 million settlement was anything but the end. And while Wells said it had fired some 5,300
people over five years for creating the phony accounts, a public outcry ensued and government
officials - from Senator Elizabeth Warren to the Treasury Secretary, Jack Lew - lambasted Wells for
its actions. Many called for CEO John Stumpf to resign.
https://specials-
images.forbesimg.com/imageserve/57ea97774bbe6f24d1f8ad99/800x0.jpg?fit=scale&background=
000000
Wells Fargo Starts Damage Control
In a play for damage control, Wells said on September 13 that it was abolishing all sales goals in its
retail banking business starting on January 1, 2017 - meaning that the types of quotas that led the
fraud will soon no longer exist. Stumpf publicly apologized. And yet, reports indicate that federal
prosecutors - the U.S. Attorneys for the southern district of NY and northern district of CA - have
begun investigations into the bank's behavior.
https://specials-
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Stumpf Gets Grilled By The Senate
On September 20, John Stumpf testified in front of the Senate Banking Committee. Again, he
apologized but it wasn't enough for the senators. "You should resign. You should be criminally
investigated by the Department of Justice and Securities and Exchange Commission," Senator Warren
told Stumpf. Other senators pressed him on executive compensation and whether there should be
clawbacks.
https://specials-
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Carrie Tolstedt Gets Scrutiny
Of particular interest to the committee is Carrie Tolstedt: She ran the unit that was responsible for the
millions of fake accounts. Tolstedt retired this past summer, but could still have millions of dollars in
compensation clawed back. CEO Stumpf has declined to publicly comment on whether Tolstedt
deserves this compensation - providing his critics with more reason to want him gone.
https://specials-
000000
Will Stumpf Keep His Job?
Stumpf, however, seems unlikely to lose his job. Analysts and investors on Wall Street are more
forgiving of Stumpf than their Main Street and DC counterparts. Many are pointing to Wells Fargo's
"superior" return in the market as reason Stumpf should stick around. Plus, in the wake of 2008's
financial crisis, not one senior banking executive lost their job - despite persistent calls from the
public and Senate committees for such punishment.
<hr>
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S3ra Sutan Rajo Ali

20170428 05 Shareholder Revolt At Wells Fargo -- The Threat Of The Choice Act
2017-09-28 12:03 PM
https://www.forbes.com/sites/christopherskroupa/2017/04/28/shareholder-revolt-at-wells-fargo-the-
threat-of-the-choice-act/#5ed9f9706eb8
http://bit.ly/2wX7Aok
Shareholder Revolt At Wells Fargo -- The Threat Of The Choice Act
Christopher P. Skroupa , Apr 28, 2017 @ 11:46 AM 1,821
https://specials-
images.forbesimg.com/imageserve/3fd38e0a03c1405ea1fc1aeeb3f0388a/960x0.jpg?fit=scale
(AP Photo/Rogelio V. Solis)
The annual meeting with Wells Fargo and its investors dominated headlines this week when the
traditionally tame annual meeting grew volatile, with investors vocalizing outrage toward both
management and the company board. The first AGM since the scandal that rocked the financial
services landscape last September grew heated as at least one investor had to be physically removed
from the room by security.
The large-scale fraud resulted in the termination of 5,300 employees, the largest compensation
clawback in banking history, and provided a textbook example of the consequences of ineffective
engagement between management, boards and company stakeholders. "The focus of the meeting was
the board's responsibility for the cross-selling sales scandal and the fact that they were in the dark and
asleep at the switch," Brandon Rees, Deputy Director of Investment for AFL-CIO says.
"They literally didn't know they had a problem until they read about it in the Los Angeles Times and
even after it had surfaced publicly, they were slow to get a handle on it." AFL-CIO owns 1.6 million
shares in Wells Fargo and were present for what Rees describes as a "three-ring circus." The board
was given little to no insight on the scandal, and shareholders raised legitimate concern reflected in
the withhold votes on individual directors.
Engagement between company management and boards is a vital aspect of corporate governance-
transparency between shareholders and issuers is a fundamental right, according to Rees, that's been
established as a standard since World War II.
The Financial Choice Act 2.0 proposed in 2016, introduced last week by the House Financial Services
Committee, would scale back investor rights dramatically, says Ken Bertsch, Executive Director of
the Council of Institutional Investors. "The Financial Choice Act would roll back shareholder rights
in a number of dimensions and that's obviously of great concern to us," Bertsch explains.
"It would essentially eliminate shareholder proposals except, I think, where hedge fund activists
might use them as part of their campaigns." The business-first focus of the Trump administration has
created an imbalance of power between issuers and investors-and the former would be given
significantly more weight with the proposed repeal of select Dodd-Frank provisions and the passage
of this revised version of the Financial Choice Act.
Gallery https://www.forbes.com/pictures/57ea956d31358e16c589f99f/the-wells-fargo-fake-acco/
The Wells Fargo Fake Account Scandal: A Timeline
Launch Gallery - 9 images
"The Financial Choice Act would be a disaster for investors, especially in financial services
companies," Rees says. "You continue to have board accountability failures, like what occurred at
22
Wells Fargo, that show you need to have independent regulators." According to a 2015 study
published by the Securities Exchange Commission, 80 percent of investors believe that proxy voting
increases shareholder value, with an average confidence level of 7.2 on a scale of 1 to 10. (Nearly a
quarter of respondents assigned a confidence level of 10.)
A number of corporate disclosure rules would be affected by the Dodd-Frank repeal, which the
Republican-led Congress and Trump administration are targeting directly in their move to deregulate
and alter the financial-service arena. A decrease in corporate transparency and engagement practices
would be some of the greatest casualties, according to Rees.
"This is not about repealing an aspect of the Dodd-Frank Act-this about taking away shareholder
rights that they've enjoyed since the 1940s, so talk about turning back the clock," he says. "It's a
radical disenfranchisement of shareowner rights."
Christopher P. Skroupa is the founder and CEO of Skytop Strategies, a global organizer of
conferences.
a 2015 study published by the Securities Exchange Commission https://www.sec.gov/comments/4-

681/4681-3.pdf
<hr>
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S3ra Sutan Rajo Ali

20170807 15 Wells Fargo, Awash in Scandal, Faces Violations Over Car Insurance Refunds
2017-09-28 02:01 PM
https://www.nytimes.com/2017/08/07/business/wells-fargo-insurance.html?mcubz=0&_r=0
http://nyti.ms/2fAl41R
Wells Fargo, Awash in Scandal, Faces Violations Over Car Insurance Refunds
By GRETCHEN MORGENSON AUG. 7, 2017
https://static01.nyt.com/images/2017/08/08/business/08DB-WELLSweb/08DB-WELLSweb-
master768.jpg
The prospect of governmental action against Wells Fargo appears to be diminishing, despite mounting
evidence of mistreatment of customers. Credit Rick Wilking/Reuters
Wells Fargo, the scandal-plagued bank, is facing new regulatory scrutiny for not refunding insurance
money owed to people who paid off their car loans early, according to people briefed on the inquiry.
Just last month Wells Fargo was found to have forced unneeded collision insurance on consumers
who financed their car purchases.
That practice, first disclosed by The New York Times, affected 800,000 customers according to an
analysis commissioned by the bank. Some 274,000 people were pushed into delinquency as a result,
and 25,000 cars were wrongly repossessed. The latest inquiry, by officials at the Federal Reserve
Bank of San Francisco, where the bank has its headquarters, involves a different, specialized type of
insurance that is sold to consumers when they buy a car.
Called guaranteed auto protection insurance, or GAP, it is intended to protect a lender against the fact
that a car - the collateral for its loan - loses significant value the moment it is driven off the lot. GAP
insurance, also known as guaranteed asset protection, makes up that difference for a lender if, for
instance, a car is stolen before the loan is paid off. Regular car insurance typically covers only the
current market value.
Related Coverage
Wells Fargo Forced Unwanted Auto Insurance on Borrowers JULY 27, 2017
Wells Fargo May Have Found More Fake Accounts Created by Employees AUG. 4, 2017
Wells Fargo Is Accused of Making Improper Changes to Mortgages JUNE 14, 2017
Accusations of Fraud at Wells Fargo Spread to Sham Insurance Policies DEC. 9, 2016
Because Wells Fargo is a large auto lender, tens of thousands of customers may have been affected
by the bank's actions on GAP insurance. It is not mandatory for car buyers to carry GAP insurance,
which typically costs $400 to $600. But car dealers push the insurance, and lenders like it because of
the protection it provides. When borrowers pay off the loans early, they are entitled to a refund of
some of the GAP insurance premium because the coverage they paid for is no longer needed.
Laws in nine states require that customers get unused insurance money back. They are Alabama,
Colorado, Indiana, Iowa, Maryland, Massachusetts, Oklahoma, Oregon and South Carolina. Jennifer
A. Temple, a Wells Fargo spokeswoman, provided a statement saying:
"During an internal review, we discovered issues related to a lack of oversight and controls
surrounding the administration of Guaranteed Asset Protection products. We are reviewing our
practices and actively working with our dealers and have already begun making improvements to the
GAP refund process. If we find customer impacts, we will make customers whole."
24
Ms. Temple declined to say when the problem began. She said the bank was trying to assess how
many customers had been affected. Wells Fargo improved controls on the refund process in 2014,
she said. The unit of the bank that makes car loans is called Wells Fargo Dealer Services. Asked about
the regulatory inquiry into GAP insurance at Wells Fargo, Darren Gersh, a spokesman for the Federal
Reserve Board in Washington said,
"We are focused on ensuring that the root causes of a firm's compliance and controls breakdowns are
understood and addressed." He declined to comment on the specifics, adding that "the Federal
Reserve Board will take any regulatory and supervisory steps we feel are necessary to ensure the
firm's attention to compliance."
A failure to refund the insurance money harmed borrowers whose cars were repossessed by increasing
what they owed, a figure that the bank reports to consumer credit bureaus. All 50 states require that
the amount of unused insurance be credited to those borrowers' accounts, reducing the amount owed.
https://static01.nyt.com/images/2017/08/08/us/08DB-WELLSJP/08DB-WELLSJP-master675.jpg
A car dealership in Shelbyville, Ky. An inquiry claims that Wells Fargo did not properly repay
thousands of customers who no longer needed guaranteed asset protection, or GAP, insurance. Credit
Luke Sharrett/Bloomberg
The bank alluded to the new problem briefly in its quarterly financial statement issued Friday. "The
company has identified certain issues related to the unused portion of guaranteed auto protection
waiver or insurance agreements between the dealer and, by assignment, the lender, which may result
in refunds to customers in certain states," Wells Fargo said in the filing.
"These and other issues related to the origination, servicing and/or collection of indirect consumer
auto loans, including related insurance products, may subject the company to formal or informal
inquiries, investigations or examinations from federal, state and/or local government agencies, and
may also subject the company to litigation."
GAP coverage is similar to home mortgage insurance, which shields lenders against a default if a
borrower loses his or her job and cannot make the payments. Car buyers who finance their purchases
typically add the cost of the GAP coverage to the amount of the loan. The interest that borrowers pay
on the coverage goes to the bank that made the loan.
"Dealer Services is on a journey to strengthen its business, fix problems and help build a better Wells
Fargo," Ms. Temple said. "We've taken huge proactive steps to improve the customer experience."
The new problem raises questions about Wells Fargo's internal controls and its board's oversight of
company operations. In a separate crisis at Wells Fargo that was exposed last year, bank employees
were found to have created millions of credit card and bank accounts that customers had not
requested.
That led to millions of dollars in fines and the departure of the chief executive, John G. Stumpf. More
recently, after the disclosure that the bank had forced auto insurance on customers who did not need
it, several Democratic lawmakers asked that hearings be convened to learn more. Senator Elizabeth
Warren, a Massachusetts Democrat who is on the Senate Banking Committee, also reiterated her
request that the Fed oust 12 of Wells Fargo's 15 directors, saying they had violated their duties to
oversee risk management at the bank in the period when the improprieties had taken place.
In its regulatory filing on Friday, Wells said its directors had undertaken actions to enhance
governance and oversight. "The board recognizes that there is still work to be done, and, in response
to feedback received at our annual stockholders meeting in April 2017, the board is engaging in an
25
S3ra Sutan Rajo Ali
ongoing comprehensive review of its structure, composition and practices," it said. The bank expects
the review to result in changes to be disclosed in the coming months, it added.
In a statement to employees issued Friday with the filing, Timothy J. Sloan, Wells Fargo's chief, said,
"To regain the trust we have lost, we must continue to be transparent with all our stakeholders and go
beyond what has been asked of us by our regulators by reviewing all of our operations - leaving no
stone unturned - so we can be confident we have done all that we can do to build a better, stronger
Wells Fargo."
A version of this article appears in print on August 8, 2017, on Page A1 of the New York edition with
the headline: Car Insurance Again Trips Up Wells Fargo, as U.S. Scrutiny Grows. Order Reprints|
Today's Paper|Subscribe
first disclosed by The New York Times https://www.nytimes.com/2017/07/27/business/wells-fargo-

unwanted-auto-insurance.html?_r=0
goes to the bank that made the loan https://www.esurance.com/info/car/myth-gap-insurance-pays-
for-any-totaled-car
created millions of credit card and bank accounts
https://www.nytimes.com/2016/09/09/business/dealbook/wells-fargo-fined-for-years-of-harm-to-
customers.html
reiterated her request https://www.warren.senate.gov/files/documents/2017-7-
28_Wells_Fargo_Fed_letter.pdf
a statement https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-ceo-shares-
updates-companys-rebuilding-trust
Wells Fargo Forced Unwanted Auto Insurance on Borrowers JULY 27, 2017
https://www.nytimes.com/2017/07/27/business/wells-fargo-unwanted-auto-insurance.html
Wells Fargo May Have Found More Fake Accounts Created by Employees AUG. 4, 2017
https://www.nytimes.com/2017/08/04/business/dealbook/wells-fargo-fraud-accounts.html
Wells Fargo Is Accused of Making Improper Changes to Mortgages JUNE 14, 2017
https://www.nytimes.com/2017/06/14/business/wells-fargo-loan-mortgage.html
Accusations of Fraud at Wells Fargo Spread to Sham Insurance Policies DEC. 9, 2016
https://www.nytimes.com/2016/12/09/business/dealbook/wells-fargo-accusations-sham-insurance-
policies.html
<hr>
26

20170831 03 Wells Fargo uncovers up to 1.4 million more fake accounts
2017-09-28 11:34 AM
http://money.cnn.com/2017/08/31/investing/wells-fargo-fake-accounts/index.html
http://cnnmon.ie/2vvmNMV
Wells Fargo uncovers up to 1.4 million more fake accounts
by Matt Egan @mattmegan5 August 31, 2017: 12:34 PM ET
http://pmd.cdn.turner.com/money/big/investing/2017/04/19/wells-fargo-ceo-fake-accounts-
repairing-trust.cnnmoney_1024x576.mp4
Wells Fargo CEO: We must get back America's trust
Wells Fargo has uncovered up to 1.4 million more fake accounts after digging deeper into the bank's
broken sales culture. The findings show that Wells Fargo's problems are worse than the bank
previously admitted to when the scandal began almost a year ago. Wells Fargo (WFC) now says it
has found a total of up to 3.5 million potentially fake bank and credit card accounts, up from its earlier
tally of approximately 2.1 million.
In other words, there are two-thirds more fake accounts than previously realized. The additional fake
accounts were discovered by a previously announced analysis that went back to January 2009 and
that further reviewed the original May 2011 to mid-2015 period. About 190,000 accounts were
slapped with unnecessary fees for these accounts, Wells Fargo said. That's up from 130,000
previously.
Wells Fargo also discovered a new problem: thousands of customers were also enrolled in online bill
pay without their authorization. The review found 528,000 potentially unauthorized online bill pay
enrollments. Wells Fargo blamed unrealistic sales goals placed on employees for encouraging the
unauthorized bill pay and bank account openings.
Related: Wells Fargo accused of ripping off mom-and-pop shops
"We apologize to everyone who was harmed by unacceptable sales practices that occurred in our
retail bank," Wells Fargo CEO Tim Sloan said in a statement. Wells Fargo is trying to make things
right by scrapping its sales goals, installing new management and paying out millions in refunds.
Wells Fargo said it will now pay a total of $6.1 million to refund customers for unauthorized bank
and credit card accounts, up from $3.3 million previously.
The bank also promised to pay $910,000 to refund customers for the 528,000 potentially improper
online bill pay enrollments. The review of online bill pay was required by the September 2016
settlement. Additionally, Wells Fargo has agreed to a $142 million national class action settlement to
cover fake accounts that were opened back to 2002. That settlement received preliminary approval
from a federal judge in July.
Related: Wells Fargo customer: It felt like my car was held as extortion
Senator Elizabeth Warren, a fierce critic of Wells Fargo, called the discovery of more fake accounts
"unbelievable" on Twitter. The Democrat renewed her calls for Congress to hold more Wells Fargo
hearings and for the Federal Reserve to remove board members who served during the scandal. "I
don't know what they're waiting for," Warren said.
Wells Fargo declined to comment on Warren's tweets, but said its management and board have "taken
many steps" to "make things right," including installing new leadership and holding executives
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S3ra Sutan Rajo Ali
accountable by clawing back compensation. The Federal Reserve didn't respond to requests for
comment on Warren's tweet. Federal Reserve chief Janet Yellen said in July that the Fed does have
the power to oust directors "if it proves appropriate."
The @federalreserve should remove every @wellsfargo Board member who served during this
scandal. I don't know what they're waiting for.
- Elizabeth Warren (@SenWarren) August 31, 2017
Jaret Seiberg, an analyst at Cowen Washington Research Group, predicted the latest news means the
political and legal "spotlight will continue to shine brightly on Wells Fargo." "Every new disclosure
seems to expand the scope of the bank's troubles, which creates the perception that the scandal is
getting bigger rather than going away," Seiberg wrote in a report on Thursday.
Wells Fargo is struggling to put the fake account scandal that began last fall behind it. New allegations
of harming customers have rocked the bank in recent months. In late July, Wells Fargo admitted to
forcing up to 570,000 borrowers into unneeded auto insurance. About 20,000 of those customers may
have had their cars repossessed due to these unnecessary insurance costs.
Wells Fargo has also been accused in a recent lawsuit of ripping off vulnerable mom-and-pop
businesses on credit card fees -- an allegation that the bank has denied. Wells Fargo urged customers
who believe accounts were opened in their name to call a dedicated hotline: 1-877-924-8697.
CNNMoney (New York) First published August 31, 2017: 9:03 AM ET
scandal began almost a year ago. http://money.cnn.com/2016/09/08/investing/wells-fargo-created-

phony-accounts-bank-fees/?iid=EL
Related: Wells Fargo accused of ripping off mom-and-pop shops
http://money.cnn.com/2017/08/11/investing/wells-fargo-small-business-credit-card-
fees/index.html?iid=EL
blamed unrealistic sales goals http://money.cnn.com/2016/09/09/investing/wells-fargo-phony-
accounts-culture/index.html?iid=EL
$142 million national class action settlement http://money.cnn.com/2017/07/10/investing/wells-
fargo-fake-account-settlement/index.html?iid=EL
Related: Wells Fargo customer: It felt like my car was held as extortion
http://money.cnn.com/2017/08/08/investing/wells-fargo-auto-insurance-scandal/index.html?iid=EL
remove board members http://money.cnn.com/2017/06/19/investing/elizabeth-warren-wells-fargo-
board-federal-reserve/index.html?iid=EL
Fed does have the power http://money.cnn.com/2017/07/13/investing/elizabeth-warren-wells-fargo-
janet-yellen-board/index.html?iid=EL
August 31, 2017 https://twitter.com/SenWarren/status/903268838489419776
570,000 borrowers into unneeded auto insurance http://money.cnn.com/2017/07/28/investing/wells-
fargo-auto-insurance-car-loans/index.html?iid=hp-toplead-dom
cars repossessed http://money.cnn.com/2017/08/08/investing/wells-fargo-auto-insurance-
scandal/index.html?iid=EL
ripping off vulnerable mom-and-pop businesses http://money.cnn.com/2017/08/11/investing/wells-
fargo-small-business-credit-card-fees/index.html?iid=EL
<hr>
28

20170831 09 Why Wells Fargo Might Not Survive Its Fake Accounts Scandal
2017-09-28 12:25 PM
http://fortune.com/2017/08/31/wells-fargo-fake-accounts-scandal-2017-tim-sloan/
http://for.tn/2jb0BBO
Why Wells Fargo Might Not Survive Its Fake Accounts Scandal
Peter Conti-Brown, Aug 31, 2017
http://fortune.com/2017/08/31/wells-fargo-fake-accounts-scandal-2017-tim-sloan/
Share: Wells Fargo: Tim Sloan's Plan to Turn the Bank Around
Wells Fargo CEO Tim Sloan took over the company last year after it's fake accounts scandal.
http://fortune.com/12eddde4-f918-45cf-a59b-c791b138b019
On Thursday, Wells Fargo announced that the scandal that has plagued it for nearly a year is ongoing:
The bank discovered 1.4 million additional fraudulent accounts, bringing the total to 3.5 million. This
figure is staggering-both in the size of the wrongdoing of the bank's employees and in that we're still
getting our heads around a scandal nearly a year after it blasted onto the front pages.
It comes after the bank has admitted that it erroneously charged over 800,000 customers for car loan
insurance that they no longer needed. And these incidents are only some of the thousand cuts that one
of the most valuable brands in banking has endured. These dark and accumulating clouds hanging
over Wells Fargo lead us to ask the existential question: Can the bank survive?
Related
Day Three Of The World Economic Forum (WEF) 2017
Fortune 500
Here's The Biggest Reason Bank of America is Crushing It vs. Wells Fargo
http://fortune.com/2017/09/04/bank-of-america-crushing-it-vs-wells-fargo/
In the aftermath of the scandal, former CEO John Stumpf gave close to a textbook testimony on
Capitol Hill-if the textbook needed an example of the worst possible way to handle a scandal in front
of Congress. Stumpf hemmed and hawed, quarreling with members of Congress and giving
misleading answers about the scope of this scandal. And it wasn't just Stumpf: The bank's entire
public relations approach appeared to be to minimize the scandal and disclaim any problem at all.
In the most obviously misleading talking point, the bank kept insisting that the 5,300 fired employees
represented something of a rounding error given that the bank employs almost 300,000 people. That
would be a fair point-except that the real denominator we need is the number of employees engaged
in cross-selling to Wells customers in the U.S.
Given the profound mishandling of the scandal at the top, it was natural for the board to prompt a
change in leadership and pursue an internal investigation. But the new CEO is Tim Sloan, former
president and chief operating officer who has worked at Wells since the late 1980s. That's not exactly
a fresh direction. Worse still is the board's own exculpatory report, written by the law firm Shearman
and Sterling.
The report recites at length why the board did everything it could have done and congratulated it for
the independent decision to fire Stumpf and another senior executive responsible for the mess. The
board members themselves, on the other hand, were by their lawyers' "independent" account beyond
reproach. As Harvard professor Howell Jackson put it,
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S3ra Sutan Rajo Ali
"If you have a taste for the genre" of self-serving, nominally independent but wholly insulated post-
scandal law firm reports, "the Shearman & Sterling Report is nicely executed. But if you are trying
to figure out whether the Wells Fargo directors should be elected to another term of service, the
Report needs to be unpacked with a more careful eye." It is no surprise, then, that the board faced
significant shareholder backlash in the aftermath of both the scandal and the board's response to it.
There is some light on the horizon. This month, Wells announced that former Federal Reserve
Governor Elizabeth Duke will ascend to the board's chair. Duke was a competent, well-regarded
member of the Fed's Board of Governors throughout the financial crisis, from 2008 to 2013. Although
Wells faces a different kind of crisis altogether, Duke's experience will be valuable and could prove
decisive in guiding the bank out of the morass its former leaders have placed it in.
I will be teaching the Wells Fargo case to Wharton students this year. In the fall, it will be a case of
how to mismanage a firm's responsibilities to employees, customers, the government, and markets.
In the spring, I have no idea what I will teach. It is up to Wells Fargo's senior leadership to write the
rest of that story. If this week's news means Duke and her new associates are finally giving the public
the full disclosures, serious investigations, and meaningful accountability that this scandal has needed
from the beginning, then the story might have a happy ending.
If the week means we're seeing more of the same-incremental disclosures with no serious attempt to
excise this scandal at its source-we may well soon be talking about Wells Fargo the way we talk about
Wachovia, Washington Mutual, or Lehman Brothers.
Peter Conti-Brown is an assistant professor at The Wharton School of the University of Pennsylvania.
This article has been corrected to clarify Tim Sloan's tenure at Wells Fargo.
Here's The Biggest Reason Bank of America is Crushing It vs. Wells Fargo
http://fortune.com/2017/09/04/bank-of-america-crushing-it-vs-wells-fargo/
1.4 million additional fraudulent accounts http://fortune.com/2017/08/31/wells-fargo-increases-fake-
account-estimate/
put it https://corpgov.law.harvard.edu/2017/04/22/one-take-on-the-report-of-the-independent-
directors-of-wells-fargo-vote-the-bums-out/
The Wells Fargo Fake Accounts Scandal Just Got a Lot Worse http://fortune.com/2017/08/31/wells-
fargo-increases-fake-account-estimate/
She Started as a Teller. Now She's the Highest-Ranking Woman in Banking
http://fortune.com/2017/08/16/betsy-duke-wells-fargo-highest-ranking-woman/
Wells Fargo Names Betsy Duke as its New Chair in Response to Scandal
http://fortune.com/2017/08/15/wells-fargo-board-chair-duke-sanger/
<hr>
30

20170831 10 That Wells Fargo fake account scandal is way worse than you thought
2017-09-28 12:31 PM
http://www.sandiegouniontribune.com/opinion/the-conversation/sd-wells-fargo-fake-accounts-
scandal-is-way-worse-20170831-htmlstory.html
http://bit.ly/2wlEfzS
That Wells Fargo fake account scandal is way worse than you thought
By Luis Gomez, August 31, 2017, 12:20 PM
http://www.sandiegouniontribune.com/opinion/editorials/94400338-132.html
Wells Fargo scandals: Why the SEC must act to end abuses
Wells, the third-largest U.S. bank, disclosed in a regulatory filing on August 4 that the Consumer
Financial Protection Bureau (CFPB) is looking into the matter, one of many regulatory probes the
bank faces over its treatment of depositors and borrowers.
The bogus bank account scandal at {Wells Fargo} appears to be a lot worse than originally known.
Just how much worse? Newly reported figures show that the number of unauthorized accounts created
by employees is up from 2.1 million to now close to 3.5 million, {The Wall Street Journal reported}
Thursday. Repercussions for Wells Fargo since the scandal broke a year ago have been severe - it
paid a {$185 million fine} to the federal government, it underwent {Congressional hearings}, its
{CEO quit} and it has since been dogged by {a dozen investigations} and public backlash.
https://twitter.com/AP/status/903242842256150528
Editorial: {Wells Fargo scandals: Why the SEC must act to end abuses}
But the new revelations brought the bank to new lows. On Thursday, it faced piles of harsh criticism
and more calls for oversight. So severe was the criticism that even "Mad Money" host Jim Cramer
called Wells Fargo a "rogue bank." "Unbelievable," Sen. Elizabeth Warren, D-Massachusetts, {said
in one tweet} followed by another calling for additional Congressional hearings. ".@WellsFargo's
massive fraud is even worse than we thought."
https://twitter.com/MadMoneyOnCNBC/status/903254732550090752
https://twitter.com/SenWarren/status/903268583542751237https://twitter.com/SenWarren/status/90
3269166085545987
The scandal first caught widespread attention a year ago when the bank paid a $185 million fine to
federal regulators and fired more than 5,000 employees for improperly creating accounts without
customers' consent. Bank insiders blamed the scandal on an internal high-pressure sales culture, The
Wall Street Journal {reported}. The Wells Fargo scandal is hardly an isolated incident - it is not the
first one for the company and it is not the only bank to come under suspicion over its business
practices.
But the whole episode spells trouble for a consumer brand in the age of trial by social media. And
people were showing their displeasure right away. Others hinted at closing their accounts or
skepticism in having any accounts at all at Wells Fargo. Exactly how heavy the price Wells Fargo
might pay following the most recent news is yet to be seen.
https://twitter.com/ShaunKing/status/903273467704958976https://twitter.com/jordantmcl/status/90
3247357810065408
31
S3ra Sutan Rajo Ali
https://twitter.com/JQuasto/status/903305724322648064https://twitter.com/LilDessie_/status/90328
8114428260353https://twitter.com/Hellacious_K/status/903291442948399104
The bank already faces a $142 million class action lawsuit, the Los Angeles Times {reported}, and
its new revelation has {put a harsh light} on its new chief executive, Timothy Sloan. Wells Fargo
stock took a slight dip on Thursday, bringing it to around $50.92 or almost as much as it was a year
ago when the scandal first broke. Will it get worse for Wells Fargo? What should the bank do to make
amends with customers and regulators? Share your thoughts, especially if you have a Wells Fargo
account.
Wells Fargo http://www.sandiegouniontribune.com/topic/business/financial-business-

services/wells-fargo-ORCRP016609-topic.html
The Wall Street Journal reported https://www.wsj.com/articles/wells-fargos-sales-scandal-tally-
grows-to-around-3-5-million-accounts-1504184598
$185 million fine https://www.nytimes.com/2016/09/09/business/dealbook/wells-fargo-fined-for-
years-of-harm-to-customers.html?mcubz=3&_r=0
Congressional hearings https://www.usatoday.com/story/money/business/2016/09/29/live-wells-
fargo-ceo-hearing/91260900/
CEO quit https://www.washingtonpost.com/news/business/wp/2016/10/12/wells-fargo-ceo-to-retire-
in-wake-of-sham-accounts-scandal/?utm_term=.34bb60d1381a
a dozen investigations http://money.cnn.com/2017/03/31/investing/wells-fargo-investigations-fake-
account-scandal/index.html
Wells Fargo scandals: Why the SEC must act to end abuses
http://www.sandiegouniontribune.com/opinion/editorials/sd-wells-fargo-scandals-sec-20170821-
story.html#nt=oft13a-6gp1
said in one tweet https://twitter.com/SenWarren/status/903268583542751237
reported https://www.wsj.com/articles/how-wells-fargos-high-pressure-sales-culture-spiraled-out-
of-control-1474053044
reported http://www.latimes.com/business/la-fi-wells-fargo-settlement-20170710-htmlstory.html
put a harsh light https://www.nytimes.com/2017/08/31/business/dealbook/wells-fargo-ceo-
sloan.html?mcubz=3
Wells Fargo stock took a slight dip http://www.marketwatch.com/investing/stock/wfc
<hr>
32

20170831 13 Wells Fargo finds an additional 1.4 million potentially fake accounts
2017-09-28 01:37 PM
https://www.washingtonpost.com/news/business/wp/2017/08/31/wells-fargo-finds-an-additional-1-
4-million-fake-accounts/?utm_term=.26952f51556e
http://wapo.st/2wX0U9J
Wells Fargo finds an additional 1.4 million potentially fake accounts
By Renae Merle August 31, 2017
https://img.washingtonpost.com/wp-
apps/imrs.php?src=https://img.washingtonpost.com/rf/image_960w/2010-
2019/WashingtonPost/2017/08/18/Others/Images/2017-08-
11/170811_WP_WELLS_270.jpg&w=1484
(Jeremy M. Lange for The Washington Post)
Wells Fargo on Thursday said it had potentially opened an additional 1.4 million sham accounts
customers didn't want, 67 percent more than it initially estimated, escalating an already contentious
battle over the future of the mega bank. The bank revised the total, now up to 3.5 million, after
discovering that employees may have been opening unauthorized credit card and bank accounts for
customers for far longer than originally acknowledged.
The eye-popping figure will likely hamper the bank's efforts to move beyond the nearly year-long
scandal as lawmakers and regulators delve deeper into its inner workings and demand changes. The
revision also comes amid a simmering debate over whether Wall Street has learned from its mistakes
during the 2008 financial crisis and should have it regulatory reins loosened.
Republicans in Congress who support such relief have acknowledged that Wells Fargo's repeated
stumbles could make that effort more difficult. "We apologize to everyone who was harmed by
unacceptable sales practices," Wells Fargo chief executive Timothy J. Sloan said. "We are working
hard to ensure this never happens again and to build a better bank for the future."
https://img.washingtonpost.com/wp-apps/imrs.php?src=https://s3.amazonaws.com/posttv-
thumbnails-prod/09-20-
2016/t_1474402234969_name_AFP_GC0FQ.jpg&w=800&h=449.37500000000006
https://www.washingtonpost.com/b167b7c0-5f88-4bc8-af86-7b7bbd38058c
Play Video 3:04
Elizabeth Warren grills Wells Fargo CEO at Senate hearing
In a tense exchange, Senator Elizabeth Warren badgered Wells Fargo CEO John Stumpf on why he
had not offered to give up any of his compensation or to resign in the wake of the fake accounts
controversy. (Reuters)
But even the new estimates could be underestimating the extent of the problem. For its latest review,
Wells Fargo examined internal data dating back to 2009 rather than 2011 as it had done initially. Yet,
the bank has previously acknowledged that instances of unauthorized accounts have been found as
far back as 2002. The bank doesn't plan to extend its review any further, Sloan said.
"The data just is not as available or as high-quality," he said. "We've cast a wide net to reach customers
and address their remaining concerns." The latest review also does not address other scandals that
have beset the firm recently, including that 570,000 of its auto loan customers were charged for
insurance they didn't need, driving some to default and have their cars repossessed.
[Wells Fargo's scandal damaged their credit scores. What does the bank owe them?]
33
S3ra Sutan Rajo Ali
Even one of Wells Fargo's largest shareholders, Warren Buffet, appears to have become weary of the
controversy. "Anytime you put focus on an organization that has hundreds of thousands of people
you may very well find that it wasn't just the one who misbehaved that you find out about," he said
on CNBC Wednesday. "What you find is there's never just one cockroach in the kitchen."
The latest revelations will keep the "political and regulatory spotlight" on the bank for some time,
Jaret Seiberg, an analyst with Cowen, said in a research report Thursday. "What the bank needs to do
is build political capital so it can escape this controversy," Seiberg said. "Hurricane Harvey could
provide that opportunity if the bank is seen as taking the lead in helping with the recovery."
Wells Fargo said earlier this week it was donating $1 million to relief efforts related to Hurricane
Harvey, sending $500,000 to the American Red Cross Disaster Relief Fund and $500,000 to
nonprofits in the affected area. Regulators have already fined the bank $185 million after it
acknowledged that employees had opened unauthorized accounts for customers to meet aggressive
sales goals and qualify for bonuses.
Wells Fargo fired 5,000 employees over several years for the practice. It declined to comment on
whether more employees were fired for the practice during the additional years reviewed. Of the 3.5
million potentiality unauthorized accounts the bank has now identified, about 190,000 incurred fees
and other charges, Wells Fargo said, up from its initial estimate of 130,000.
It is now expected to issue refunds of more than $6 million, double its initial estimate. The expanded
review also found problems in another part of the bank's business. About 528,000 accounts were
potentially enrolled in online bill pay programs without customers' knowledge. The bank said it would
refund $910,000 to those customers who incurred fees or charges.
Sloan stressed that some of the additional accounts identified during the latest review may have been
properly authorized by customers. He said the accounts were nonetheless included in the totals
because they were not being actively used. The scandal has grown to dominate Wall Street and
Washington's conversations about one of the country's largest and oldest banks and the corporate
culture that allowed the practice to go on for so long.
The bank's longtime CEO John Stumpf resigned and was forced to give up millions in bonuses. Wells
Fargo is still under investigation by regulators and has seen customers shy away. Congressional
leaders have repeatedly summoned company executives to Washington for hearings.
https://img.washingtonpost.com/wp-apps/imrs.php?src=https://s3.amazonaws.com/posttv-
thumbnails-prod/09-20-2016/t_1474388096581_name_Stumpf.jpg&w=800&h=450
https://www.washingtonpost.com/0a17fc50-5761-418c-991f-74fe3fe41acc
Play Video 2:09
Wells Fargo CEO: 'We let our customers down'
Wells Fargo CEO John Stumpf apologized in front of a Senate panel on Sept. 20, 2016. Wells Fargo
has faced criticism for its handling of a scandal involving fake accounts set up by Wells Fargo
employees. (Reuters)
Under pressure, the bank announced earlier this month that it would shake up its board of directors.
Stephen W. Sanger, former chief executive of General Mills, is being replaced by Elizabeth "Betsy"
Duke as board chair starting in 2018. Two other long-serving members of the board, Cynthia Milligan
and Susan Swenson, also announced they would retire.
34
But the move falls short of what Sen. Elizabeth Warren (D-Mass.) and other critics have called for.
The Federal Reserve should remove every Wells Fargo board member who served during this scandal,
Warren said on Twitter Thursday. "I don't know what they're waiting for," she said. On a conference
call with reporters, Sloan defended the company's board. "I appreciate that there are a number of folks
that continue to question what our board has done," he said. "My personal perspective is that the
board has taken significant action."
The @federalreserve should remove every @wellsfargo Board member who served during this
scandal. I don't know what they're waiting for.
- Elizabeth Warren (@SenWarren) August 31, 2017
The troubles surrounding Wells Fargo have become a proxy battle on Capitol Hill over the future of
the Consumer Financial Protection Bureau, the watchdog agency established after the 2008 financial
crisis. The bureau levied the biggest fine in its history against Wells Fargo for the sham accounts.
Democrats and consumer groups argue that the bank's problem show the need for the agency.
But Republicans, who have long been critical of the CFPB, argue that the agency should have done
more. "Wells Fargo remains the poster-child for protecting, not destroying, the Consumer Financial
Protection Bureau," Ed Mierzwinski, program director of U.S. Public Interest Research Group, said
in a statement. "Congress and the administration should reject demands by powerful special interests
to weaken the bureau."
Rep. Jeb Hensarling (R-Tex.), chairman of the House Financial Services Committee has repeatedly
lambasted the agency and proposed stripping it of many of its powers. "This latest revelation of
customer abuse is further evidence of catastrophic mismanagement at the bank," Hensarling said in a
statement. The Financial Services Committee is still investigating the matter, he said. "Regrettably,
the CFPB's failure to provide documents the committee subpoenaed is slowing progress on our
investigation," he said.
[Wells Fargo's scandal damaged their credit scores. What does the bank owe them?]
https://www.washingtonpost.com/business/economy/in-wake-of-wells-fargo-scandal-whats-to-be-
done-about-damaged-credit-scores/2017/08/18/f26d30e6-7c78-11e7-9d08-
b79f191668ed_story.html?utm_term=.5c9011ab469f
August 31, 2017 https://twitter.com/SenWarren/status/903268838489419776
Wells Fargo fires 4 executives as investigation continues into sham accounts
https://www.washingtonpost.com/news/business/wp/2017/02/21/wells-fargo-fires-4-executives-as-
sham-accounts-scandal-investigations-continue/?utm_term=.eb6c0981c557
Wells Fargo CEO steps down in wake of sham accounts scandal
https://www.washingtonpost.com/news/business/wp/2016/10/12/wells-fargo-ceo-to-retire-in-wake-
of-sham-accounts-scandal/?utm_term=.79f2acf4541f
Philadelphia sues Wells Fargo for allegedly discriminating against minority borrowers
https://www.washingtonpost.com/news/get-there/wp/2017/05/15/philadelphia-sues-wells-fargo-for-
allegedly-discriminating-against-minority-borrowers/?utm_term=.6ad1a096be58
Dems wield Equifax, Wells Fargo in fight over arbitration
https://www.washingtonpost.com/business/dems-wield-equifax-wells-fargo-in-fight-over-
arbitration/2017/09/27/6d24b102-a3b0-11e7-b573-
8ec86cdfe1ed_story.html?tid=hybrid_collaborative_1_na
YouAreHere 3 weeks ago

About 10 years ago, more or less, the hubby opened a savings account at Wells Fargo. We were told
that if we put a certain amount of money into an account, we wouldn't be charged fees (don't
remember the exact amount.) We then set up a direct deposit to go to that account. What happened
35
S3ra Sutan Rajo Ali
next was our fault...we didn't pay attention to the bank statements, we just assumed (yes, I know) that
everything was going ok.
We had some things going on at the time, and some things just fell onto the back burner (again, I
know...still our fault.) Wells Fargo came *off* the back burner a few months later when we received
an overdraft notice on our account. We immediately checked into it. It turned out that a fee was taken
out from our initial deposit, which put us under the fee limit.
After that, the fees added up until they'd actually taken out our initial deposit *and* our direct deposit
payments. The hubby immediately cancelled the direct deposit, and we went into Wells Fargo, with
the documentation we received when we opened the account to show that we were told no fees would
be taken out. Thus began an over six month long attempt to get our money back. We finally
succeeded, but we will *never* do business with Wells Fargo again. Stuff like this just reinforces that
decision.
Tamara Lichtenstein 3 weeks ago

I am one of the customers that the bank did this to. When I went to close my account a few years ago,
they dragged their feet, kept me waiting an hour, and then, though it was supposed to be closed, they
kept it open with one penny in it--and kept sending me statements. I thought it was incompetence or
stupidity, not deliberate--because what was there to gain by spending money on monthly paper
statements for a one-cent account?
After several months I went back to complain and it was closed. Now I understand why they kept it
open...
Rick From Texas 3 weeks ago

I've seen their latest commercial and it made me laugh out loud. Building a better bank for the future?
No apologies, no "we messed up big time"? What a sad joke, and one that was played on their
unfortunate customers. Zero accountability, trying desperately to tap dance around the obvious fact
that their bank is rotten to the core, and a crisis that seems to go on and on. A bunch of people need
to go to prison for this, if a regular citizen did something like this, they'd be behind bars for a very
long time.
legacy87 3 weeks ago

I worked for Wells Fargo in retail banking. First job out of college as a personal banker. Too young
to really know what was happening was not normal. Watched people who had no business being put
in charge of anyone become district managers because of sales numbers. Bankers and tellers where
making nothing off of these fake accounts.
Most where trying to do the right thing for the customers and then faced getting yelled at on calls or
in person. Sitting until 7:30pm- sometimes with their kids- at mandatory call nights every week unless
you hit your numbers the week before. DM's pushing "travel checking" "overdraft savings" "bills vs
spending checking" where the ones making serious money at the end of each quarter.
Anyone who played by the rules had very little chance of getting promoted beyond a $27k a year job.
Area presidents handpicked their support management team there was no chance to find someone
who would take concerns seriously. It would take months and months before someone who was extra
unethical to get fired- but first they were put up as examples of how awesome of a salesperson
someone could be- put on star employee recognition emails and sent to area events because they made
their DM's look good all while their coworkers where complaining of their cheating.
Getting out of there was the best thing that ever happened to me. I look back and wonder why on
earth anyone put up with the horrid management practices, the three times a day sales check in calls,
the meet-the-manager sessions that would encourage branch managers to push their bankers to get
more products open before the customer left.
"Come on Jonny...just get them to do a short and long term savings account...don't let them say
no...just tell them that is what they are getting and it how we do it." I could write a book on all the
36
nasty tricks and practices DM's and branch managers would come up with. The best part is all those
fired bankers and managers who got caught- all hired by BMO Harris.
Arcticninja 3 weeks ago

I suspect you don't have a clue about business... Why would the government bail out banks that went
bankrupt on shady business deals?? The same reason Wells Fargo won't ever go under. Corporations
own politicians. People can hate WF, but why not hate the politicians that have accepted donations
from them?? You also have no idea about Wells Fargo's business model. It is very similar to UPS.
Create fear with the employees to push profits up. Really solid model to be honest. Notice Wells
Fargo didn't take government money back in 08.
Mayor_ 3 weeks ago

Wells Fargo was bailed just as much as the banks who got money directly. How long would they
have lasted without the government underwriting the entire structure of the banking system? The
lesson to be learned is that big corporations own this country completely. It's over. They won. Of
course, there are more of us than there are of them.....
<hr>
37
S3ra Sutan Rajo Ali

20170908 12 It's been a year since the Wells Fargo scandal broke - and new problems are still
surfacing
2017-09-28 01:26 PM
http://www.latimes.com/business/la-fi-wells-fargo-one-year-20170908-story.html
http://lat.ms/2xTNvvY
It's been a year since the Wells Fargo scandal broke - and new problems are still surfacing
James Rufus Koren, 2017-09-08T03:00:00-0700
http://www.latimes.com/business/94554605-132.html
In July, the bank said it would pay $80 million in refunds to auto-loan borrowers (Sep. 8, 2017) (Sign
up for our free video newsletter here http://bit.ly/2n6VKPR)
One year ago today, Wells Fargo & Co. made the stunning admission in a settlement with regulators
that it created perhaps 2 million accounts for customers without their permission. The disclosure
ignited a scandal that led in a matter of weeks to the ouster of its chairman and chief executive, John
Stumpf, and to a host of promised reforms, including the removal of onerous sales goals that were
widely acknowledged to be the source of the problem.
But a year later, the scandal that started with outrage over sham accounts has ballooned and that sin
is just one of many the San Francisco bank has either copped to or been accused of. An internal bank
report reviewed by The Times shows that list could grow further still. The report, produced for a risk-
management committee that monitors Wells Fargo's community bank - the business unit at the center
of the accounts scandal - identifies several so-far undisclosed issues, all classified as "high risk."
They include improper fees charged on some accounts that were closed when the holders either died
or were declared legally incompetent, a practice that dates to at least early last year. Coupled with
some of the bank's recent admissions - including an audit that found the number of sham accounts
may total 3.5 million - the report shows how the bank continues to uncover bad practices that
previously went undetected or unaddressed.
"It keeps expanding," said bank analyst Bert Ely. "The question one has to ask is, when does the last
shoe drop? Or are there more to drop? Anyone who looks at this continues to be astounded at how
problems from the past keep coming up." On Sept. 8, 2016, Wells Fargo admitted to the fake-accounts
fiasco and agreed to pay $185 million in fines and penalties to regulators, including the Los Angeles
city attorney's office.
Wells Fargo's pressure-cooker sales culture comes at a cost

E. Scott Reckard Employees say intense sales demands at Wells Fargo branches create a dilemma for
many: cheat or risk being fired. Bank officials say they make ethical conduct a priority. Employees
say intense sales demands at Wells Fargo branches create a dilemma for many: cheat or risk being
fired. Bank officials say they make ethical conduct a priority. (E. Scott Reckard)
http://www.latimes.com/business/la-fi-wells-fargo-sale-pressure-20131222-story.html
The bank's practices were first uncovered by a 2013 Los Angeles Times investigation, which led to
a 2015 lawsuit from City Atty. Mike Feuer. Since then, though, the bank has acknowledged additional
bad practices and is facing investigations and lawsuits over many more - and not just within the
community banking division. In July, the bank said it would pay $80 million in refunds to hundreds
of thousands of auto-loan borrowers who were forced to pay for bank-purchased auto insurance
policies despite having coverage of their own.
38
In an August regulatory filing, the bank reported that the Consumer Financial Protection Bureau is
investigating two separate matters, including allegations that the bank improperly charged fees to
mortgage borrowers when loan applications were delayed - a practice also alleged in two recent
lawsuits. Other suits filed over the last year allege a bevvy of additional problems, including
improperly changing the terms of mortgage loans for bankrupt borrowers, signing up customers for
unauthorized life insurance policies and overcharging small businesses for credit- and debit-card
processing services.
Some of the latest issues to surface, most notably the auto insurance matter, are the result of the bank's
own review of practices and consumer complaints. Mary Mack - who replaced Carrie Tolstedt, the
former head of the community bank who was fired last year - said Wells Fargo is dedicating more
resources to analyzing, investigating and correcting potential problems.
"We want to escalate [issues] quickly so we can get the right eyes and support and help on potential
issues," she said. She acknowledged that new admissions or allegations weigh on morale at the bank,
but said that's to be expected and that the bank cannot identify or fix everything overnight. "All the
evolution we're engaged in takes time," Mack said.
"It is hard for the team to read negative headlines, particularly since the headlines may not be
capturing the full essence of the story behind it, but that's part of the process we're in right now."
Current and former Wells Fargo employees say bank executives did not take complaints seriously
enough before the scandal, preferring to deal with them one by one and failing to look into the root
causes of repeated issues.
An employee in the bank's risk-management division said all of that has changed dramatically in the
last year. "When issues like this are popping up, the bank is doing a better job of acting and reacting
to it," said the employee, who spoke on the condition of anonymity. "A couple years ago, they never
would have taken this kind of action to figure out who was affected by a problem and how far back
it goes. Nobody was looking and saying, 'What really caused that fee to be assessed?'"
Scott Siefers, an analyst with investment bank Sander O'Neill, said it's good that the bank appears to
be taking problems more seriously - but at the same time, it all but ensures there's more bad news
ahead. A bank the size of Wells Fargo, which has more than 250,000 employees and boasts that it
does business with 1 in 3 American households, is bound to uncover problems if it goes out looking
for them, he said. And the more it finds, the more it paints a picture of a bank that is or was out of
control.
"The problem with being such a broad and deep company is if you turn over enough rocks, you're
going to find some things," Siefers said. The internal report, published in July, lists five high-risk
issues, all identified by the bank itself. Wells Fargo officials, including Mack and Vic Albrecht, risk
officer for the community bank, declined to comment on the report.
Albrecht did say, though, that issues categorized as "high risk" in reports to the community bank's
risk committee would generally include those that might be widespread, affect customers or have
regulatory ramifications. "'High-risk' does not mean on-par with the sales practices issue," he said,
noting that the issue of unauthorized accounts is instead categorized by the bank as "critical," a higher
risk level.
The issue of early withdrawal penalties for deceased or legally incompetent account holders was
identified last September, and is a violation of bank policies and federal regulations, according to the
report. The report notes that Wells Fargo's systems are supposed to ensure fees are waived in those
cases. The report does not suggest how widespread the problem might be or how far back it might go
39
S3ra Sutan Rajo Ali
but nevertheless identifies it as a "potential UDAAP concern" - a reference to consumer protection

laws that ban unfair, deceptive or abusive acts or practices.
Another issue mentioned in the report, identified in November, has to do with fees paid by business
account holders when they deposit cash. The report provides much less information about this issue,
calling it "confidential" and subject to attorney-client privilege. For both of those issues, the report
suggests the bank will offer some kind of remediation to affected customers.
Other matters identified as high risk are problems with how errors are reported at the branch level, a
lack of proper notification when calls to customers are being recorded and problems with how stop-
payments are processed, resulting in refunds to customers going unclaimed. Siefers, who has not seen
the internal report, said these issues don't appear to rise to the level of some of the bank's other
admissions but that more findings will nevertheless wear on investors.
Wells Fargo's stock has suffered since scandal

Source: Yahoo Finance; percentage change since Sept. 7, 2016. James Rufus Koren
"None of this is good news," he said. Though Wells Fargo has continued to earn billions in profits,
the scandal has taken a toll. The bank has paid or agreed to pay at least $414 million in refunds and
settlements, and hundreds of millions more on legal fees, consultants and other costs related to the
accounts scandal and its aftermath. Meanwhile, the bank has continued to grow, but at a slower pace
with new account openings down significantly through the second quarter of this year.
For instance, the bank reported opening 395,000 new credit card accounts during the quarter - a
decline of 42% from the same period last year. And the bank's stock has suffered. It declined sharply
in the weeks after the scandal broke and, despite a recovery, has continued to underperform compared
to its peers. Since Sept. 7 of last year, the day before the scandal broke, Wells Fargo shares are up
just 3%. The KBW Nasdaq Bank Index, a benchmark for the banking industry, is up 27% over that
period.
If more problems continue to leak out, Siefers said investors will eventually get fatigued. "You get to
clear the decks for a period of time and look retrospectively," he said. "But there is a point at which
investors and analysts would say, 'You just keep finding these things, and it feels like this is just what
the company is.' If we're still having conversations like this a year from now, that will be a problem."
sham accounts http://www.latimes.com/business/la-fi-wells-fargo-incentives-20161005-snap-

story.html
recent admissions http://www.latimes.com/business/la-fi-wells-fargo-va-20170804-story.html
2013 Los Angeles Times investigation http://www.latimes.com/business/la-fi-wells-fargo-sale-
pressure-20131222-story.html
hundreds of thousands of auto-loan borrowers http://www.latimes.com/business/technology/la-fi-
wells-fargo-insurance-20170728-story.html
Consumer Financial Protection Bureau http://www.latimes.com/topic/business/u.s.-consumer-
financial-protection-bureau-ORGOV00000233-topic.html
alleged in two recent lawsuits http://www.latimes.com/business/la-fi-wells-fargo-rate-lock-
20170829-story.html
mortgage loans for bankrupt borrowers http://www.latimes.com/business/hiltzik/la-fi-hiltzik-wells-
mortgages-20170615-story.html
unauthorized life insurance policies http://www.latimes.com/business/la-fi-wells-fargo-prudential-
20161212-story.html
40
overcharging small businesses https://www.reuters.com/article/us-wellsfargo-merchants/wells-

fargo-joint-venture-sued-over-merchant-credit-card-fees-idUSKBN1AN1ZY
California Legislature approves arbitration measure spurred by the Wells Fargo scandal
http://www.latimes.com/business/la-fi-wells-fargo-arbitration-bill-20170906-story.html
Even as Wells Fargo scandal deepens, GOP lawmakers push bank deregulation
http://www.latimes.com/business/lazarus/la-fi-lazarus-senate-financial-choice-cfpb-20170905-
story.html
Former Wells Fargo executives say they were scapegoated for accounts scandal
http://www.latimes.com/business/la-fi-wells-fargo-termination-20170901-story.html
<hr>
41
S3ra Sutan Rajo Ali

20170920 08 Wells Fargo's fake-account scandal leads to credit downgrade
2017-09-28 12:17 PM
https://www.cnbc.com/2017/09/20/wells-fargos-fake-account-scandal-leads-to-dbrs-credit-
downgrade.html
http://cnb.cx/2wXFycn
Wells Fargo's fake-account scandal leads to credit downgrade
Jeff Cox | @JeffCoxCNBCcom
Published 11:13 AM ET Wed, 20 Sept 2017 Updated 1:34 PM ET Wed, 20 Sept 2017
Wells Fargo's troubles with its fake-account scandal have earned the bank a credit downgrade from
ratings agency DBRS.
The move is in reaction to the growing costs the third-largest U.S. bank by assets faces regarding
the scandal.
Wells Fargo's shares are down more than 3 percent in 2017, underperforming the broader banking
sector.
https://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2017/09/19/104719599-3ED1-
MM-C-Block-SHORT1-091917.600x400.jpg?v=1505862941
Sen. Warren: WFC misdeeds all about juicing reported profits
7:16 PM ET Tue, 19 Sept 2017 | 00:46
https://www.cnbc.com/video/2017/09/19/sen-warren-wfc-misdeeds-all-about-juicing-reported-
profits.html
Wednesday, 20 Sep 2017 | 6:16 AM ST | 00:46
Jim Cramer spoke with Senator Elizabeth Warren about malpractice at Wells Fargo.
https://www.cnbc.com/c99afe3e-c255-46ac-b676-a0cef900d41f
Wells Fargo's troubles with its fake-account scandal have earned the bank a credit downgrade from a
ratings agency. DBRS announced Wednesday that it is taking down the Wells rating from AA to AA
(low). That's essentially a step and a half below top-rated, but still well within the range of investment-
grade. The move is in reaction to the growing costs the third-largest U.S. bank by assets faces
regarding the scandal, in which customers were enrolled in programs without their consent or
knowledge.
"The one-notch rating downgrade reflects operational and management missteps at the Company and
resultant reputational damage stemming from ongoing issues surrounding the Company's sales
practices, as well as practices impacting other consumer-related areas," DBRS said in a statement.
Wells Fargo has admitted that as many as 3.5 million accounts were involved.
Employees under pressure to meet aggressive sales goals enrolled customers in multiple products.
Though the practice had been ongoing for years, it only came to public light a year ago when Wells
agreed to pay a $185 million settlement with various authorities. Since then, other disclosures have
arisen. The practices also extended to enrolling customers in auto insurance that they didn't need, and
the bank paid a $142 million class-action settlement. It also has said it will pay $2.8 million in refunds
to affected customers.
https://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2016/10/20/104035508-
RTX29UJW.530x298.jpg?v=1501204962
A customer leaves an ATM at a Wells Fargo branch in Denver.
Rick Wilking | Reuters
42
"As the Company works to address the issues, expenses have been elevated and revenue growth in
some areas has softened," DBRS said. "Additionally, negative headlines are likely to remain an
ongoing risk, as the Company faces heightened regulatory scrutiny, litigation, as well as additional
investigations and the ongoing challenge of evolving the culture of the organization."
While DBRS said the problems place "a degree of uncertainty" over Wells, the agency said the bank
otherwise looks solid. Wells is approaching its problems "from a position of strength," DBRS said.
"Despite growing expenses and a worsening efficiency ratio, the Company continues to outperform
many global peers," the agency added.
Wells Fargo's position remains strong in deposit share, commercial and consumer banking and other
areas of financial operations. However, shares this year have performed poorly, down 3.2 percent
year to date compared with a 4 percent gain for the KBW Nasdaq Bank Index. Wells Fargo declined
to comment.
customers were enrolled in programs without their consent https://www.cnbc.com/2016/11/16/wells-

fargo-is-hard-at-work-trying-to-rebuild-its-reputation.html
enrolling customers in auto insurance https://www.cnbc.com/2017/07/27/wells-fargo-reportedly-
forced-car-loan-customers-to-buy-auto-insurance.html
<hr>
43
S3ra Sutan Rajo Ali

20170924 11 A Timeline of Wells Fargo's Sales Scandal
2017-09-28 01:11 PM
https://www.fool.com/investing/2017/09/24/a-timeline-of-wells-fargos-sales-scandal.aspx
http://bit.ly/2xGNr4G
A Timeline of Wells Fargo's Sales Scandal
John Maxfield, Sep 24, 2017 at 9:12AM
This timeline charts the most significant events in the sales scandal that erupted at Wells Fargo last
year. It has now been a year since industry regulators revealed the sales scandal at Wells Fargo
(NYSE:WFC). As the following timeline shows, a lot has happened since then at the 165-year-old
bank.
Wells Fargo sales scandal timeline
Dec. 21, 2013 -- The Los Angeles Times reports that "relentless pressure to sell has battered employee
morale and led to ethical breaches" at Wells Fargo. "To meet quotas, employees have opened
unneeded accounts for customers, ordered credit cards without customers' permission, and forged
client signatures on paperwork."
https://g.foolcdn.com/editorial/images/457385/calendar_large.jpg
A desktop calendar, scrolling through pages. Image source: Getty Images.
Sept. 8, 2016 -- The Consumer Financial Protection Bureau (CFPB) reveals that thousands of Wells
Fargo employees opened 2 million deposit and credit card accounts that consumers may not have
authorized.
Sept. 13, 2016 -- The chairman and CEO of Wells Fargo, John Stumpf, goes on Jim Cramer's show,
Mad Money, in his first interview since the scandal was revealed. Stumpf appears to assign blame for
the misconduct, which ultimately spanned a decade and a half and occurred throughout Wells Fargo's
nationwide footprint:
We have at any one time 100,000 team members in our branch and retail bank network. And we
hire people, and people turn over. Of those 100,000, the vast majority do the right thing, they come
to work. Their life's work and mission is to help people. And I love these people. Every year -- on
average for the last five years, 1,000 did not do the right thing.
Sept. 20, 2016 -- Stumpf testifies about the scandal to the Senate Banking Committee. He's panned
in the media for being insufficiently contrite and unprepared for the senators' questions.
Sept. 27, 2016 -- The independent members of Wells Fargo's board announce that Stumpf will forfeit
$41 million in unvested equity awards and not be paid a bonus for 2016. It was also announced that
the former head of the bank's retail unit, Carrie Tolstedt, had left the company and will forfeit $19
million in unvested equity awards, and similarly not receive a bonus for 2016.
Sept. 29, 2016 -- Stumpf testifies before the House of Representative's Committee on Financial
Services.
Oct. 12, 2016 -- Stumpf resigns as chairman and CEO. President and Chief Operating Officer Tim
Sloan succeeds him at CEO, while former lead independent director Stephen Sanger becomes
chairman. Stumpf says:
I am grateful for the opportunity to have led Wells Fargo. I am also very optimistic about its future,
because of our talented and caring team members and the goodwill the stagecoach continues to enjoy
44
with tens of millions of customers. While I have been deeply committed and focused on managing
the company through this period, I have decided it is best for the company that I step aside. I know
no better individual to lead this company forward than Tim Sloan.
Oct. 14, 2016 -- Wells Fargo reports third-quarter earnings, the first with Sloan as CEO. According
to Sloan's prepared remarks for the conference call:
As the new CEO, my immediate and highest priority is to restore trust in Wells Fargo. As you
know, on Sept. 8, we announced settlements with the CFPB, the OCC [Office of the Comptroller of
the Currency], and the Los Angeles city attorney related to sales practices in retail banking. I know
that this is not the type of activity you expect from Wells Fargo and is certainly not what we expect
from ourselves. We let down our customers, our shareholders, and our team members. We simply
failed to fulfill our responsibility to all our stakeholders.
Nov. 17, 2016 -- Issues first in a series of monthly updates on the performance of its retail unit in the
wake of the scandal. The impact is seen in the 44% drop in the number of new consumer checking
accounts opened in October compared with the year-ago period, as well as a 50% decline in new
credit card applications.
Nov. 29, 2016 -- Wells Fargo's board of directors amends the bank's bylaws to require the separation
of the chairman and CEO roles and for the chairman and vice chairman of the board to be independent
directors. According to the bank's newly elected chairman, Stephen Sanger:
The board previously acted to elect an independent chairman to lead the board, and we believe
formalizing this structure is the right decision at this time for the company and its investors,
customers, and team members. Efforts to restore the trust of our customers and team members are
well underway and will continue until we have fully addressed the issues surrounding retail banking
sales practices.
While the investigation of these practices and related matters by the independent directors continues
in earnest, we believe this action will enhance the board's independence and its oversight of the
company's management, and we appreciate the feedback that we received from our investors on this
matter.
Feb. 20, 2017 -- Wells Fargo elects two new independent board members: Karen B. Peetz, retired
president of The Bank of New York Mellon, and Ronald L. Sargent, retired chairman and CEO of
office-supply retailer Staples.
Feb. 21, 2017 -- Wells Fargo fires four former leaders of its retail bank.
March 1, 2017 -- Wells Fargo reports that no members of its executive committee will receive bonuses
for 2016 and that equity awards they received in 2014 that vest after 2016 will be reduced by up to
50%. The result is an aggregate reduction in compensation totaling approximately $32 million,
according to the bank. Sanger says:
These compensation actions for the Operating Committee, though not related to any findings of
improper behavior, are part of the board's ongoing efforts to promote accountability and ensure Wells
Fargo puts customer interests first. As we seek to regain trust, the board is taking decisive actions.
We will continue to work to make right what went wrong and remain focused on providing the
accountability and oversight that our customers, employees, and investors expect and deserve.
March 21, 2017 -- Sloan hosts a companywide town hall meeting to introduce six new long-term
goals and preview a new national advertising campaign entitled "Building Better Every Day." From
Sloan's prepared remarks:
We're making things right for our customers and our team members. We are fixing problems, and
we're building a better bank for the future. As we rebuild trust, we will reintroduce to our stakeholders
45
S3ra Sutan Rajo Ali
what our Wells Fargo bankers have always been known for, and that's helping our customers to
succeed financially.
March 28, 2017 -- The OCC, the primary regulator for national banks, downgrades Wells Fargo's
Community Reinvestment Act (CRA) rating to "Needs to Improve" as a result of "previously issued
regulatory consent orders." Sloan says:
We are disappointed with this rating given Wells Fargo's strong track record of lending to, investing
in, and providing service to low- and moderate-income communities. However, we are committed to
addressing the OCC's concerns because restoring trust in Wells Fargo and building a better bank for
our customers and our communities is our top priority.
Wells Fargo is deeply committed to economic growth, sustainable homeownership and neighborhood
stability in low- and moderate-income communities and will continue to invest above and beyond
what is required by CRA.
March 28, 2017 -- Wells Fargo says that it reached a $110 million agreement to settle a class action
lawsuit filed in May 2015 over the bank's retail sales practices. Sloan says:
This agreement is another step in our journey to make things right with customers and rebuild trust.
We want to ensure that each customer impacted by our sales practices issue has every opportunity for
remediation, and this agreement presents an additional option. We continue to encourage customers
to contact us directly so that we can act quickly to refund fees and address any concerns.
April 4, 2017 -- CEO Tim Sloan publishes open letter to the bank's customers to "thank them for their
loyalty" and share updates regarding its retail sales practices. Sloan says:
As we work toward rebuilding the trust of our customers, team members, community partners, and
shareholders, we are committed to keeping our stakeholders informed. This is why we are not only
thanking them, but also sharing the significant progress we have made to make things right, fix
problems, and build a better Wells Fargo, recognizing much work remains that we are committed to
do.
April 7, 2017 -- Proxy advisory firm Institutional Shareholder Services issues a report urging
shareholders to vote against the re-election of 12 out of the bank's 15 board members. Wells Fargo's
board responds with a prepared statement laying out eight steps the bank has taken in response to the
sales scandal.
April 10, 2017 -- Wells Fargo releases the findings of an investigation into the company's retail sales
practices overseen by a special committee of the bank's independent directors and assisted by the law
firm Shearman & Sterling. Sloan says:
The board's report is a necessary examination of what went wrong in our culture, operations, and
governance. It's clear from the board's review that we had an incentive program and high-pressure
sales culture in our Community Bank that over time drove behavior that in many cases was
inappropriate and inconsistent with our values. Because of our decentralized operating model, our
corporate leadership took too long to understand the seriousness and scope of the problem, and as a
result, the actions we took over the years to address it weren't adequate.
April 13, 2017 -- Wells Fargo reports first-quarter earnings. The bank's bottom line was flat, at $5.5
billion, but a number of other critical metrics show signs of strain, including its efficiency ratio and
return on assets.
April 17, 2017 -- The bank launches the previously announced marketing campaign, Building Better
Every Day.
46
April 21, 2017 -- Wells Fargo expands its class action settlement, previously announced in March, to
include any customers who were affected by sales practice issues as early as May 2002, pushing the
covered range back by seven years. The updated settlement will total $142 million. Sloan says:
The expansion of this agreement is another important step to make things right for our customers.
On our journey to rebuild trust, we want to ensure our customers feel confident that we have heard
their concerns about retail sales practices, which includes offering them numerous opportunities for
remediation. We encourage any customer with concerns or questions about their accounts to contact
us.
April 25, 2017 -- Wells Fargo holds its annual meeting. Shareholders vent their ire at the bank by,
among other things, reelecting the bank's board members with such underwhelming majorities that
the results are seen by corporate governance experts as a vote of no confidence in all but three
members of the board.
July 6, 2017 -- The bank forms a new stakeholder-relations group to "foster a more integrated
approach to engaging with its key stakeholders." Former director of investor relations Jim Rowe is
promoted to lead the group, reporting to Chief Administrative Officer Hope Hardison, who says:
As Wells Fargo continues to focus on rebuilding trust and building a better bank, it's more
important than ever that our key stakeholder relationships and strategies are well integrated. During
a decade in investor relations, Jim has become a trusted leader at Wells Fargo. His knowledge of our
businesses and proven ability to partner across the company make him ideal to advance our efforts to
create an aggregated stakeholder view.
July 8, 2017 -- The class action settlement for retail sales practices receives preliminary court
approval. Sloan says:
We are pleased that the court found the settlement to be fair, reasonable, and adequate. This
preliminary approval is a major milestone in our efforts to make things right for our customers. It
further ensures each customer impacted by an improper retail sales practice has every opportunity for
remediation. This is in addition to our direct efforts to review accounts and provide remediation.
These efforts are fundamental to restoring trust with all our stakeholders and building a better Wells
Fargo for the future.
July 27, 2017 -- Wells Fargo discloses that a separate internal investigation uncovered 570,000
customers with car loans form the bank who may have been inappropriately charged for failing to
maintain qualifying insurance on their cars. "For approximately 20,000 customers, the additional
costs of the insurance could have contributed to a default that resulted in the repossession of their
vehicle," says the bank. Franklin Codel, head of Wells Fargo consumer lending, states:
We take full responsibility for our failure to appropriately manage the CPI [collateral protection
insurance] program and are extremely sorry for any harm this caused our customers, who expect and
deserve better from us. Upon our discovery, we acted swiftly to discontinue the program and
immediately develop a plan to make impacted customers whole.
Aug. 4, 2017 -- Sloan issues a companywide message on the bank's "rebuilding trust efforts," noting
among other things that "[b]ecause there is so much interest in the work we are doing to rebuild trust,
we can expect more headlines as we fulfill our commitment to identify and fix problems and make
things right for our customers."
Aug. 15, 2017 -- Wells Fargo announces that three members of its board, including chairman Stephen
Sanger, will retire at the end of the year. Former Federal Reserve governor Elizabeth "Betsy" Duke
was unanimously elected by the board to replace Sanger, who says:
Betsy was the unanimous choice to lead the board as it continues its focus on strengthening
oversight and rebuilding the trust of shareholders, customers, and other stakeholders. Her broad
47
S3ra Sutan Rajo Ali
understanding of the financial system and markets combined with years of main street community
banking experience make her the ideal chair to work with the rest of the board and Tim Sloan as
Wells Fargo continues to move forward.
Aug. 22, 2017 -- Sloan issues a companywide message "to address team member questions and
provide updates on the steps the company is taking to make things right for customers and build a
better Wells Fargo."
Aug. 31, 2017 -- Wells Fargo reports the results of its expanded third-party review of its retail sales
practices, increasing the number of potentially fake customer accounts up from 2.1 million to 3.5
million.
reports http://www.latimes.com/business/la-fi-wells-fargo-sale-pressure-20131222-story.html
reveals https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-
bureau-fines-wells-fargo-100-million-widespread-illegal-practice-secretly-opening-unauthorized-
accounts/
goes on https://www.cnbc.com/2016/09/18/wells-fargo-ceo-john-stumpf-talks-with-cnbcs-cramer-
im-accountable.html
testifies https://www.c-span.org/video/?415547-1/ceo-john-stumpf-testifies-unauthorized-wells-
fargo-accounts
announce https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-chairman-
and-ceo-john-stumpf-provides-update
testifies https://financialservices.house.gov/uploadedfiles/hhrg-114-ba00-wstate-jstumpf-
20160929.pdf
resigns https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-chairman-ceo-
john-stumpf-retires-board-directors
reports https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-reports-56-
billion-quarterly-net-income
prepared remarks https://seekingalpha.com/article/4012263-wells-fargo-and-companys-wfc-ceo-
timothy-sloan-q3-2016-results-earnings-call-transcript?part=single
Issues https://newsroom.wf.com/press-release/community-banking-and-small-business/wells-fargo-
reports-october-retail-banking
amends https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-amends-laws-
require-separation-chairman-and-ceo
elects https://newsroom.wf.com/press-release/wells-fargo-names-two-new-independent-directors
fires https://newsroom.wf.com/press-release/wells-fargo-announces-actions-based-retail-banking-
sales-practices-investigation
reports https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-announces-
executive-compensation-actions-promote
hosts https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-ceo-tim-sloan-
announces-six-new-long-term-goals
downgrades https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-announces-
community-reinvestment-act-rating
says https://newsroom.wf.com/press-release/wells-fargo-announces-agreement-principle-settle-
class-action-lawsuit-regarding
open letter
http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwellsfargo.com%2Fcommit
ment&esheet=51536188&newsitemid=20170404006016&lan=en-
US&anchor=wellsfargo.com%2Fcommitment&index=1&md5=9cda4c2a6cd1e175757fcd0ead327d
12
prepared statement https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-
board-directors-issues-statement-iss-report
48
releases https://newsroom.wf.com/press-release/community-banking-and-small-business/wells-
fargo-board-releases-findings-independent
Sloan says https://newsroom.wf.com/press-release/community-banking-and-small-business/wells-
fargo-statement-regarding-board
reports https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-reports-55-
billion-quarterly-net-income-0
launches https://newsroom.wf.com/press-release/marketing-and-sponsorships/wells-fargo-launches-
new-brand-campaign-building-better
expands https://newsroom.wf.com/press-release/wells-fargo-expands-class-action-settlement-retail-
sales-practices-142-million-adds
annual meeting https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-
announces-preliminary-voting-results-2017-annual
forms https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-forms-new-
stakeholder-relations-group
receives https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-proposed-
class-action-settlement-retail-sales
discloses https://newsroom.wf.com/press-release/consumer-lending/wells-fargo-announces-plan-
remediate-customers-auto-insurance
issues https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-ceo-shares-
updates-companys-rebuilding-trust
announces https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-announces-
board-changes
issues https://newsroom.wf.com/press-release/wells-fargo-ceo-shares-progress-team-members-
making-things-right-customers
reports https://newsroom.wf.com/press-release/wells-fargo-reports-completion-expanded-third-
party-review-retail-banking-accounts
Is Jim Cramer Right About Wells Fargo? https://www.fool.com/investing/2017/09/03/is-jim-cramer-
right-about-wells-fargo.aspx
Is Wells Fargo & Company a Buy? https://www.fool.com/investing/2017/09/07/is-wells-fargo-
company-a-buy.aspx
Should Investors Be Worried About Wells Fargo?
https://www.fool.com/investing/2017/08/04/should-investors-be-worried-about-wells-fargo.aspx
Would Warren Buffett Buy 10% of Wells Fargo Today?
https://www.fool.com/investing/2017/08/29/would-warren-buffett-buy-10-of-wells-fargo-
today.aspx
<hr>
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S3ra Sutan Rajo Ali

20170925 14 Wells Fargo CEO Sloan to be grilled by Congress
2017-09-28 01:57 PM
https://www.bizjournals.com/sanfrancisco/news/2017/09/25/wells-fargo-ceo-sloan-congress.html
http://bit.ly/2fRIj4r
Wells Fargo CEO Sloan to be grilled by Congress
By Mark Calvey - Sep 25, 2017, 1:43pm PDT
https://media.bizj.us/view/img/10159941/3040375261-5*480xx2035-2718-1054-0.jpg
It was only a year ago when John Stumpf, then CEO of Wells Fargo, testified before the more
Pete Marovich | Bloomberg
Wells Fargo CEO Tim Sloan will testify Oct 3 before the Senate Banking Committee in a hearing
titled, "Wells Fargo: One Year Later." Given his predecessor John Stumpf's performance before
Congress last year, many are expecting fireworks. Sloan is expected to share with senators in the two-
hour hearing how the embattled bank is addressing the fake accounts scandal that came to light in
September 2016 and resulted in Stumpf's ouster.
Sloan is also expected to discuss the latest scandal in which Wells Fargo (NYSE: WFC) forced the
placement of auto insurance on borrowers who did not need the coverage. The New York Times
reported in August that Wells was aware of the improperly placed insurance even as it was damaging
auto-loan borrowers' credit reports and repossessing cars.
On Monday, Wells was eager to put a positive spin on Sloan's upcoming appearance. "We welcome
the opportunity to further update the committee about the progress Wells Fargo has made over the
last year. Since last October, we have taken numerous important steps to fix issues, make things right
for our customers and build a better bank," Wells spokesman Ruben Pulido told the San Francisco
Business Times in a statement.
Sen. Elizabeth Warren, D-Mass., speaking recently on CNBC, reiterated her call for the Federal
Reserve to throw out Wells Fargo's entire board. Warren is one of 23 senators serving on the Banking
Committee. Wells hired the law firm Sidley Austin to help prepare Sloan for his first appearance
before the Senate Banking Committee since taking over as CEO last October, Reuters reported, noting
that Gibson Dunn, which helped Stumpf prepare his congressional testimony last year, will also work
with Sloan in a supporting role.
Wells Fargo's supporters are hoping Sloan's remarks will be received better than Stumpf's were a year
ago, when Warren excoriated Stumpf. Stumpf's second appearance before Congress last September,
before the House Financial Services Committee, was so bad that one source, who had been asked by
the Business Times for his odds that Stumpf would not survive the scandal, called the newspaper
mid-way through Stumpf's testimony to say, "This is a disaster. I need to lower my odds that Stumpf
will keep his job." Stumpf was out less than two weeks later.
two-hour hearing https://www.banking.senate.gov/public/index.cfm/hearings?ID=FE4441A6-

5D3B-4C88-9637-16F9BD71DCAC
New York Times reported https://www.nytimes.com/2017/08/07/business/wells-fargo-
insurance.html?mcubz=0&_r=0
speaking recently on CNBC https://www.bizjournals.com/sanfrancisco/news/2017/09/20/elizabeth-
warren-wants-wells-fargo-board-fired.html
Reuters reported https://www.reuters.com/article/legal-us-wellsfargo-accounts-lawfirm/wells-fargo-
hires-new-law-firm-to-prepare-ceo-for-senate-appearance-idUSKCN1C01FD
50
second appearance before Congress http://www.npr.org/sections/thetwo-

way/2016/09/29/495914359/wells-fargo-ceo-john-stumpf-faces-house-panel-over-fake-accounts
Stumpf was out https://www.bizjournals.com/sanfrancisco/news/2016/10/12/john-stumpf-wells-
fargo-ceo-career-scandal.html
Video: Top senator calls for Fed to fire Wells Fargo's board Video: Top senator calls for Fed to fire
Wells Fargo's board Video: Top senator calls for Fed to fire Wells Fargo's board
https://www.bizjournals.com/sanfrancisco/news/2017/09/20/elizabeth-warren-wants-wells-fargo-
board-fired.html
I asked Wells Fargo CEO Tim Sloan why he's still running the bank I asked Wells Fargo CEO Tim
Sloan why he's still running the bank I asked Wells Fargo CEO Tim Sloan why he's still running the
bank https://www.bizjournals.com/sanfrancisco/news/2017/08/31/wells-fargo-bank-ceo-tim-sloan-
scandal-wfc-board.html
State Treasurer wants Wells Fargo board member ousted State Treasurer wants Wells Fargo board
member ousted State Treasurer wants Wells Fargo board member ousted
https://www.bizjournals.com/sanfrancisco/news/2017/09/01/california-treasurer-calls-for-board-
members.html
Republicans in Congress say Obama administration let Wells off easy Republicans in Congress say
Obama administration let Wells off easy Republicans in Congress say Obama administration let Wells
off easy https://www.bizjournals.com/sanfrancisco/news/2017/09/22/wells-fargo-congress-gop-
barack-obama-cordray.html
Wells Fargo CEO says he 'can't promise' no more problems Wells Fargo CEO says he 'can't promise'
no more problems Wells Fargo CEO says he 'can't promise' no more problems
https://www.bizjournals.com/sanfrancisco/news/2017/09/13/wells-fargo-ceo-investors.html
<hr>
51
S3ra Sutan Rajo Ali

20170926 07 Senate Small Business Committee Presses Wells Fargo CEO on Account Fraud Scandal
2017-09-28 12:10 PM
https://smallbiztrends.com/2017/09/wells-fargo-ceo-scheduled-to-testify-before-the-senate.html
http://bit.ly/2fo2E0v
Senate Small Business Committee Presses Wells Fargo CEO on Account Fraud Scandal
Sep 26, 2017 by Joshua Sophy
https://smallbiztrends.com/wp-content/uploads/2017/09/Wells-850x476.jpg
Senators are now wondering if small businesses were impacted by the fake account scandal that
continues to plague Wells Fargo (NYSE:WFC). Late last week, Democrat Sen. Jeanne Shaheen, of
New Hampshire, wrote a letter (PDF) on behalf of the Senate Committee on Small Business and
Entrepreneurship addressing its concerns with the scandal.
In it, she writes to Wells Fargo CEO Timothy J. Sloan, "Given the significant number of small
business customers using Wells Fargo products, I am concerned about your recent statement that your
review of Wells Fargo's operations could yield additional problems with the bank's practices." Sloan
recently revealed that the fake accounts scandal could be far worse than originally reported. In fact,
more than 1.4 million more fake accounts may have been created. And the fraud extended beyond
just one unit of the bank.
He's also told the press in interviews that he promises to continue investigating the scope of the fraud
conducted by Wells Fargo. Shaheen is concerned because more than three million small businesses
are Wells Fargo customers. The bank is the largest lender participating in the Small Business
Administration's 7(a) loan program. These are SBA-backed loans procured through a third-party
lender like Wells Fargo.
"Small businesses around the country rely on lenders, such as Wells Fargo, to provide products and
services that help them grow, succeed and maintain financial security. As the impact of this
controversy continues to be revealed, I request that you provide me with information regarding your
review of Wells Fargo's practices as it relates to small business lending," Shaheen wrote to conclude
her letter to Sloan.
Wells Fargo CEO Scheduled to Testify Before the Senate
The head of Wells Fargo is expected to testify in October before members of the U.S. Senate. He may
be pressed for answers specific to the Small Business Committee's questions prior to that appearance.
The Wells Fargo fake accounts scheme was first uncovered by a 2013 report by the Los Angeles
Times. In it, the scam was described simply:
"To meet quotas, employees have opened unneeded accounts for customers, ordered credit cards
without customers' permission, and forged client signatures on paperwork." Thousands of employees
at Wells Fargo allegedly participated in the fraud and last year, the former CEO of Wells Fargo, John
Stumpf, resigned.
fake account scandal https://smallbiztrends.com/2016/09/financial-fraud-protection.html

letter https://www.sbc.senate.gov/public/?a=Files.Serve&File_id=342AD16F-73BB-4BB1-A97E-
5A3399859B34
addressing https://www.sbc.senate.gov/public/index.cfm/pressreleases?ID=9C8CCC59-FEBD-
4F26-A938-6210F91F770A
52
revealed https://newsroom.wf.com/press-release/wells-fargo-reports-completion-expanded-third-
party-review-retail-banking-accounts
report http://www.latimes.com/business/la-fi-wells-fargo-sale-pressure-20131222-story.html
<hr>
53
S3ra Sutan Rajo Ali

20170927 02 Comparing Bank Of America, Wells Fargo And JPMorgan Chase
2017-09-28 11:27 AM
https://seekingalpha.com/article/4110076-comparing-bank-america-wells-fargo-jpmorgan-chase
http://bit.ly/2xziu3o
Comparing Bank Of America, Wells Fargo And JPMorgan Chase
Wubbe Bos, Sep. 27, 2017 6:30 PM ET
Summary
The title Best of Breed can be lost and comes with a premium valuation.
Lower earnings valuation allows for more profits to shareholders and worse performance for
operating convergence.
A higher-quality bank is more capital efficient and the retained equity is more valuable.
After multiple requests of various readers, here is my analysis and comparison of the three largest US
banks.
Thesis
JPMorgan Chase (JPM) has taken the crown of best large-cap U.S. bank in the view of most people
from Wells Fargo (WFC). Wells Fargo had previously held this position for quite some time and
rewarded shareholders who stayed with it for the long term like Warren Buffett. Losing this crown,
however, resulted in significant underperformance.
https://static.seekingalpha.com/uploads/2017/9/27/saupload_7d8fa2396e11206eba3400408d8227e5
.png
Chart JPM data by YCharts
Given that losing the best-of-breed crown can lead to significant underperformance, is it a good
strategy for investors to put their money in JPMorgan Chase or are they better off investing in Bank
of America (BAC) or even Wells Fargo?
Return on capital
Return on capital is one of the most important metrics for banks because it determines who is using
their capital in the most efficient way. JPMorgan Chase had tangible common equity of $188B and
delivered a return on tangible equity of 14%. This compares favourably to Bank of America, which
has a tangible common equity of $175.7B combined with a return on tangible equity of 11.2%. Wells
Fargo has slightly less capital with tangible equity at $152B but still rules supreme with a return of
14.3% on its tangible capital, but JPMorgan is a close second.
Operating convergence or better reinvestment rate
Higher returns on capital are great because they allow for higher profits given an amount of capital
and a better reinvestment rate, which allows the profits to grow faster with newly retained capital. A
downside, however, is that potential operating convergence is a benefit for underperforming
competitors. Bank of America was struggling after the financial crisis, but by cutting cost and
reinvesting in the business it was able to converge to its more profitable peers, leading to
outperformance in the stock market.
54
common equity of $188B https://www.jpmorganchase.com/corporate/investor-

relations/document/2Q17_Earnings_Presentation.pdf
equity of $175.7B http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-
irhome#fbid=ElDDM_fuSUA
tangible equity at $152B https://newsroom.wf.com/sites/wellsfargo3-
e.newshq.businesswire.com/files/press_release/additional/Wells_Fargo_2017Q2Supplement.pdf
<hr>
https://seekingalpha.com/article/4110076-comparing-bank-america-wells-fargo-jpmorgan-
chase?page=2
http://bit.ly/2k5K0j9
Dividends and payout yield
Now that all banks have rebuilt their balance sheets, capital return is back on top of everyone's mind.
Wells Fargo has the highest yield with 2.9%, JPMorgan Chase has a yield of 2.39% while Bank of
America has a yield of 1.93%. However, what is important to keep in mind is that share repurchases
are another important way of returning capital to investors.
JPMorgan wants to return more than {$23B}, while Bank of America is returning over {$11B} and
Wells Fargo aims to return close to {$19.5B} in 2017 alone. This results in payout yields of 7.1% for
JPMorgan Chase, 4.3% for Bank of America and 7.3% for Wells Fargo. This means Wells Fargo is
paying you most while Bank of America is retaining more.
The downside of those high payout yields is that much of the future earnings per share growth needs
to come from the reduction of shares outstanding, and the better-operating banks cannot grow
earnings faster because they don't retain significant amounts of capital.
Scandal and risk
Problems arise sometimes and a scandal can happen to many companies but is less likely to well-
managed companies. But be aware of why those companies look to be well-managed. Good ideas
taken too far can harm businesses, like the cross-selling initiative at Wells Fargo. The risk at Wells
Fargo is that some hidden problems still might arise, but intrinsically its high return on capital, its
primarily domestic footprint and its relatively small investment bank reduce the risk at Wells Fargo
compared to Bank of America and JPMorgan Chase.
JPMorgan Chase has terrific management with Jamie Dimon and high returns. Bank of America,
however, is more risky because of its lower profitability and poorer operating history. Historic risk
for banks, however, was much larger than it is currently since leverage is reduced because of new
regulation.
Valuation
* JPMorgan has $188B in tangible common equity on which it earns 14%. This will most likely
result in a yearly profit of $26.3B. Given its strong management and operating record, a return of 7%
is fair in my opinion to calculate a market value. This results in a valuation of $376B, which is 14%
above the current market capitalisation of $330B.
* Bank of America has $175.7B in tangible common equity on which it currently earns 11.2%,
which results in a profit of $19.7B given its slightly higher risk profile. Demanding a return between
7-8% return for an investment in Bank of America is reasonable in my opinion, which gives it a
valuation of $262.3B - very close to the current market value of $261.7B.
* Wells Fargo has $152B in tangible common equity on which it currently earns 14.3%. This results
in a yearly profit of around $21.7B. Given its recent scandals but strong operating history and focus
55
S3ra Sutan Rajo Ali
on less risky activities, a discount rate of 7% is fair in my opinion. Using this to calculate the market
value results in a value of $310.5B, which is 16.3% above the current market capitalisation of $267B.
Conclusion
According to my calculations, the most attractive bank to invest in currently is Wells Fargo, with
JPMorgan Chase as a close second. Bank of America had a great run last year, outperforming its
peers, but this leaves it at a slightly higher valuation than its peers. While Bank of America might
have some more room to converge its operations to the level of its largest competitors at the current
time, the slightly better-run companies provide a better investment.
<hr>
https://www.forbes.com/sites/greatspeculations/2017/06/30/jpmorgans-27-billion-capital-return-
plan-is-the-biggest-ever-by-a-u-s-bank/#2ec86212333b
https://www.forbes.com/sites/greatspeculations/2017/06/29/bank-of-america-will-return-nearly-17-
billion-to-shareholders-over-the-next-four-quarters/#43fa8d78518e
https://www.forbes.com/sites/greatspeculations/2017/07/05/wells-fargos-capital-plan-looks-like-an-
attempt-to-attract-investor-attention/#79c04f95821f
<hr>
56

20170927 06 Senate Committee Eyes Wells Fargo Scandals' Potential Impact On SMBs
2017-09-28 12:06 PM
https://www.pymnts.com/news/financial-inclusion/2017/nearly-half-of-all-americans-have-a-tough-
time-paying-bills/
http://bit.ly/2fyrfDT
Senate Committee Eyes Wells Fargo Scandals' Potential Impact On SMBs
By PYMNTS, September 27, 2017
https://securecdn.pymnts.com/wp-content/uploads/2017/09/wells-fargo-fake-accounts-small-
business-senate.jpg
U.S. Senators have begun pressing Wells Fargo to explore whether the fake account scandal impacted
small businesses as well as individual consumers, according to Small Biz Trends reports. The
publication noted Tuesday (Sept. 26) that Senator Jeanne Shaheen (D-NH) had sent a letter to Wells
Fargo CEO Timothy J. Sloan on behalf of the Senate Committee on Small Business and
Entrepreneurship.
The letter raised concerns over how Wells Fargo's opening of fake accounts may have negatively
affected its small business customers. "Given the significant number of small business customers
using Wells Fargo products, I am concerned about your recent statement that your review of Wells
Fargo's operations could yield additional problems with the bank's practices," the Senator wrote in
the letter, sent last week.
The letter referenced revelations from Sloan that the scandal could be more widespread than
previously believed, with up to 1.4 million more fake accounts possibly created. Sloan added he will
continue to investigate and determine the breadth and scope of the scandal. Senator Shaheen noted in
the letter that Wells Fargo is "the largest provider of loans under $1 million to small businesses."
"Recent disclosures by Wells Fargo have shown that fraudulent practices extended beyond the initial
fake accounts scandal, reaching auto insurance and mortgage customers," the letter stated. "As the
impact of this controversy continues to be revealed, I request that you provide me with information
regarding your review of Wells Fargo's practices as it relates to small business lending."
The letter was sent just weeks before Sloan is slated to testify before the U.S. Senate regarding the
scandal, revelations of which first appeared in 2013. Employees were reportedly incentivized to open
fake accounts without customer approval in order to meet quotas. Reports said Sloan could be pressed
on how the scandal may have affected small business customers and Wells' small business lending
operations when he testifies in October.
reports https://smallbiztrends.com/2017/09/wells-fargo-ceo-scheduled-to-testify-before-the-
senate.html
letter https://www.sbc.senate.gov/public/_cache/files/3/4/342ad16f-73bb-4bb1-a97e-
5a3399859b34/5030796AC27696AB9087074F83194D36.senator-shaheen-letter-to-wells-fargo-
september-20-2017.pdf
slated to testify https://www.pymnts.com/news/security-and-risk/2017/wells-fargo-ceo-tim-sloan-to-
appear-before-senate-banking-committee/
<hr>
57
Key Talking Points
Effects Causes Description

heightened & ongoing comprehensive review & scrutiny Cross-selling Auto lender
its structure, composition, and practices banc-assurance Home mortgage insurance
analyse, investigate, and correct potential problems Origination, servicing, collection
litigation Consumer-related scandal
challenge to evolve the organisation culture, operations, credit reports: AnnualCreditReport.com works with the 3
and governance. credit bureaus: TransUnion, Experian, and Equifax.
inappropriate and inconsistent with our values. emerged from the 2008 crisis relatively unscathed,
growing and becoming stronger than ever.
left the bank's once-sterling reputation in tatters.
Office of Ethics, Oversight and Integrity
2wfc Timothy J. Sloan

Damage control COO CEO, employees since late 1980s
CFPB Civil Penalty Fund fine: $100m, 20160904: Exculpatory report, PR minimise the scandal and
widespread unlawful sales practices, the largest fine disclaim any problem at all.
CFPB has ever imposed.
OCC fine: $35m.
City & County of LA: $50m.
More scandal, scandal-plagued, embroiled in scandal. Law firm: Shearman and Sterling
Reputational damage beyond reproach
October 2016 compared with the year-ago period (p.29) Fines: 20160908: $185m (p.22)
44% drop in the number of new consumer checking
accounts opened.
a 50% decline in new credit card applications. Potential UDAAP concerns: unfair, deceptive, abusive
acts or practices (a ref to consumer protection laws)
BIG NO: accountability, respects, internal control, Bank executives dont take complaints seriously enough,
oversight of operations before the scandal.
Root causes of repeated issues.
strong track record of lending to, investing in, and lack of proper notification when calls to customers are
providing service to low- and moderate-income being recorded and problems with how stop-payments are
communities. processed, resulting in refunds to customers going
unclaimed.
2employees
5,300 terminated Aggressive sales goals
59
S3ra Sutan Rajo Ali
relentless pressure to sell has battered employee morale

and led to ethical breaches.
2x-employees: After Jacob Burns was killed, Stumpf and Tolstedt could To meet quotas, employees have opened unneeded
>180m go on to reap millions in executive bonuses without accounts for customers, ordered credit cards without
$67m from Carrie Tolstedt, head of retail sales division worrying about interference from whistleblowers. customers' permission, and forged client signatures on
$69m from CEO John Stumpf paperwork.
The board is clawing back executive compensation. soul-crushing culture of fear and daily intimidation by They had to open five or 10 or even 20 new credit card or
$124.6m, John Stumpfs compensation, salary & stocks. managers checking accounts for customers in a single day.
$19.3m, JS, compensation in 2015 (incl. perf bonus 12.5)
Employees: < 300,000 (source: p.13).
Customers: 800,000
2clients Credit card accounts
Refunding insurance premium. Bank accounts
Collateral protection insurance (CPI). 2.1 3.5 million fake accounts
Unneeded collision insurance after the purchase. +2/3 more fake accounts
Guanranteed auto protection insurance (GAP) >981,000 accounts were found in the expanded timeline.
Guanranteed asset protection insurance (GAP) 450,000 accounts were found in the original window.
274,000 people were pushed into delinquency. 165m retail bank accounts opened between 2009-2016.
25,000 cars were repossessed.
Accounts slapped with unnecessary fees:
130,000 190,000
The states of California and Illinois and the city of
Chicago have suspended parts of their business
relationships with the bank.
Enroll customers in multiple products.
Enroll customers in programs without consent/knowledge
Enroll online bill pay without authorisation:
528,000 customers
Unneeded auto insurance: 570,000
Charge car loan insurance: 800,000
Charge mortgage borrowers when loan apps were
delayed.
Change the terms of mortgage loans for bankrupt
borrowers.
Sign up customers for unauthorised life insurance
policies.
Overcharge small businesses with credit- and debit-card
processing services.
Early withdrawal penalties for deceased.
Legally incompetent account holders.
60
Fees paid by business account holders when they deposit

cash.
WFC closed bank accounts without warning or providing
an explanation.
frozen and overdrawn, fraudulent use of the account.
stone-walled customers.
publish the customer name to fraud warning site, denied/
rejected to open any bank accounts.
fraudulent accounts generated $2.4m in fees: overdraft

fees, monthly service fees, and other miscellaneous fees.
bogus e-mail addresses: 1234@wellsfargo.com,
noname@wellsfargo.com, or none@wellsfargo.com.
Review 1: May 2011 to mid-2015

Review 2: January 2009
Review 2: 2002
2b refunded:
201707: $80m (p.22) auto loan borrowers
$0.91m, SF, 528,000 A/C, paying bills online, w/o auth.
$3.3m (arc2#10)
+$2.8m (p.26) affected customers.
settlements:
$142m: class action, 10q, 201704
201505: $110m, class action over the bank's retail sales
practices (p.30).
refunds and settlements:

$414m (p.24)
Legal fees, consultants, other costs to scandal-related

>$100m (p.24)
61
The DFA of UDAAP: Unfair, Deceptive, Abusive Acts and Practices
The Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits unfair, deceptive, and
abusive acts and practices (UDAAP).
Wells Fargos violations include:
1. Opening deposit accounts and transferring funds without authorization: According to the banks
own analysis, employees opened roughly 1.5 million deposit accounts that may not have been
authorized by consumers. Employees then transferred funds from consumers authorized accounts
to temporarily fund the new, unauthorized accounts. This widespread practice gave the employees
credit for opening the new accounts, allowing them to earn additional compensation and to meet
the banks sales goals. Consumers, in turn, were sometimes harmed because the bank charged them
for insufficient funds or overdraft fees because the money was not in their original accounts.
2. Applying for credit card accounts without authorization: According to the banks own analysis,
Wells Fargo employees applied for roughly 565,000 credit card accounts that may not have been
authorized by consumers. On those unauthorized credit cards, many consumers incurred annual
fees, as well as associated finance or interest charges and other fees.
3. Issuing and activating debit cards without authorization: Wells Fargo employees requested and
issued debit cards without consumers knowledge or consent, going so far as to create PINs without
telling consumers.
4. Creating phony email addresses to enroll consumers in online-banking services: Wells Fargo
employees created phony email addresses not belonging to consumers to enroll them in online-
banking services without their knowledge or consent.
Consumer Financial Protection Bureau Fines Wells Fargo $100 Million for Widespread Illegal
Practice of Secretly Opening Unauthorized Accounts
Todays order (20160908) goes back to Jan. 1, 2011.
Among the things the CFPBs order requires of Wells Fargo:
1. Pay full refunds to consumers: Wells Fargo must refund all affected consumers the sum of all
monthly maintenance fees, nonsufficient fund fees, overdraft charges, and other fees they paid
because of the creation of the unauthorized accounts. These refunds are expected to total at least
$2.5 million. Consumers are not required to take any action to get refunds to which they are entitled.
2. Ensure proper sales practices: Wells Fargo must hire an independent consultant to conduct a
thorough review of its procedures. Recommendations may include requiring employees to undergo
ethical-sales training and reviewing the banks performance measurements and sales goals to make
sure they are consistent with preventing improper sales practices.
3. Pay a $100 million fine: Wells Fargo will pay a $100 million penalty to the CFPBs Civil Penalty
Fund. Todays penalty is the largest the CFPB has imposed to date.
62

01 retail banking, individual banking, consumer banking, mass banking, wholesale banking,
community banking
2017-09-28 11:25 AM
retail banking, individual banking, consumer banking, mass banking, wholesale banking,
community banking
cross-selling
Cross-selling
Cross-selling, the practice underpinning the fraud, is the concept of attempting to sell multiple
products to consumers. For instance, a consumer with a checking account might be encouraged to
take out a mortgage, or set up credit card or online banking account.[1] Success by retail banks was
measured in part by the average number of products held by a customer, and Wells Fargo was long
considered the most successful cross-seller.[2]
Richard Kovacevich, the once-CEO of Norwest Corporation and, later, Wells Fargo, allegedly
invented the strategy while at Norwest.[3][4] In a 1998 interview, Kovacevich likened mortgages,
checking and savings accounts, and credit cards offered by the company to more typical consumer
products, and revealed that he considered branch employees to be "salespeople", and consumers to
be "customers" rather than "clients".[5] Under Kovacevich, Norwest encouraged branch employees
to sell at least eight products, in an initiative known as "Going for Gr-Eight".
Early coverage
Wells Fargo's sales culture and cross-selling strategy, and its effect on customers, were documented
by the Wall Street Journal as early as 2011.[6] In 2013, a Los Angeles Times investigation revealed
intense pressure on bank managers and individual bankers to produce sales against extremely
aggressive and even mathematically impossible[7] quotas.[8] In the Los Angeles Times article, CFO
Timothy Sloan was quoted stating he was unaware of any "...overbearing sales culture". Sloan would
later replace John Stumpf as CEO.
Fraud
Employees were encouraged to order credit cards for pre-approved customers without their consent,
and to use their own contact information when filling out requests to prevent customers from
discovering the fraud. Employees also created fraudulent checking and savings accounts, a process
that sometimes involved the movement of money out of legitimate accounts.
The creation of these additional products was made possible in part through a process known as
"pinning". By setting the client's pin to "0000", bankers were able to control client accounts and were
able to enroll them in programs such as online banking.[9] Measures taken by employees to satisfy
quotas included the enrollment of the homeless in fee-accruing financial products.[10] Reports of
unreachable goals and inappropriate conduct by employees to supervisors did not result in changes
to expectations.[11]
After the Los Angeles Times article, the bank made nominal efforts to reform the company's sales
culture.[12] Despite alleged reforms, the bank was fined $185 million in early September of 2016 due
to the creation of some 1,534,280 unauthorized deposit accounts and 565,433 credit-card accounts
between 2011 and 2016.[13] Later estimates, released in May 2017, placed the number of fraudulent
accounts at closer to a total of 3,500,000.[14]
63
S3ra Sutan Rajo Ali
In December of 2016, it was revealed that employees of the bank also issued unwanted insurance
policies.[15] These included life insurance policies by Prudential Financial and renters' insurance
policies by Assurant.[16] Three whistle-blowers, Prudential employees, brought the fraud to light.
Prudential later fired these employees,[17] and announced that it might seek damages from Wells
Fargo.[18]
Fines and broader coverage
Despite the earlier coverage in the Los Angeles Times, the controversy achieved national attention
only in September of 2016, with the announcement by the Consumer Financial Protection Bureau
that the bank would be fined $185 million for the illegal activity. The Consumer Financial Protection
Bureau received $100 million, the Los Angeles City Attorney received $50 million, and the Office of
the Comptroller of the Currency received the last $35 million.[19] The fines received substantial
media coverage in the following days, and triggered attention from further interested parties.[20][21]
Initial response from Wells Fargo and management
After news of the fines broke, the bank placed ads in newspapers taking responsibility for the
controversy.[22] However, the bank rejected the notion that its sales culture led to the actions of
employees, stating "...[the fraud] was not part of an intentional strategy".[23] Stumpf also expressed
that he would be willing to accept some personal blame for the problems.
Company executives and spokespeople referred to the problem as an issue with sales practices, rather
than the company's broader culture.[24]
After earnings were reported in January 2017, the bank announced it would close over 400 of its
approximately 6000 branches by the end of 2018.[39] In May 2017, the bank announced that they
would cut costs through investment in technology while decreasing reliance on its "sales
organization".[40] The bank also revised up its 2017 efficiency-ratio goal from 60 to 61.[41]
Effects on consumers
Approximately 85,000 of the accounts opened incurred fees, totaling $2 million.[42] Customers'
credit scores were also likely hurt by the fake accounts.[43] The bank was able to prevent customers
from pursuing legal action as the opening of an account mandated customers enter into private
arbitration with the bank.[44] The bank paid $110 million to consumers who had accounts opened in
their names without permission in March of 2017.[45][46] The money repaid fraudulent fees and paid
damages to those affected.[47]
Effects on non-management Wells Fargo employees
Wells Fargo employees described intense pressure, with expectations of sales as high as 20 products
a day.[48] Others described frequent crying, levels of stress that led to vomiting, and severe panic
attacks.[49][50] At least one employee consumed hand sanitizer to cope with the pressure.[51] Some
indicated that calls to the company's ethics hotline were met with either no reaction[52] or resulted in
the termination of the employee making the call.[53]
During the period of the fraud, some Wells Fargo branch-level bankers encountered difficulty gaining
employment at other banks. Banks issue U5 documents to departing employees, a record of any
misbehavior or unethical conduct.[54] Wells Fargo issued defamatory U5 documents to bankers who
reported branch-level malfeasance, indicating that they had been complicit in the creation of
unwanted accounts,[55] a practice that received media attention as early as 2011.[56]
64
There is no regulatory process to appeal a defamatory U5, other than to file a lawsuit against the
issuing corporation. Wells Fargo created a special internal group to rehire employees who had left
the bank but were not implicated in the scandal. In April of 2017, Timothy Sloan stated that the bank
would rehire some 1000 employees who had either been wrongfully terminated or who had quit in
protest of fraud.[57]
Sloan emphasized that those being rehired would not be those who had participated in the creation of
fake accounts.[58] The announcement was made shortly after the news was released that the bank
had clawed back income from both Carrie Tolstedt and John Stumpf.
<hr>
65

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The Fake Accounts of Wells Fargo

Millions of fake accounts that drowning and burying Wells Fargo

Key Talking Points............................................................................................................................. 59

Saturday, 30 September 2017

For more on this story go to: https://consumerist.com/2016/12/07/wells-fargo-already-playing-its-

a coalition of senators wrote to Stumpf https://consumerist.com/2016/09/23/senators-to-wells-fargo-

Saturday, 30 September 2017

A blind spot among senior leaders

post-scandal scrutiny https://hbr.org/2016/09/wells-fargo-and-the-slippery-slope-of-sales-incentives

House's Financial Services Committee

Saturday, 30 September 2017

Notice the key issues here:

which broke the story, reported http://www.wsj.com/articles/federal-prosecutors-investigating-wells-

many had clearly bogus Wells Fargo e-mail addresses

vlade September 15, 2016 at 7:05 am

Elasmo Branch September 15, 2016 at 10:52 am

Yves Smith September 15, 2016 at 7:23 am

voteforno6 September 15, 2016 at 8:55 am

diptherio September 15, 2016 at 9:24 am

Valuationguy September 15, 2016 at 12:22 pm

flora September 15, 2016 at 4:13 pm

Valuationguy September 16, 2016 at 10:42 am

flora September 16, 2016 at 11:04 am

Valuationguy September 16, 2016 at 3:17 pm

Yves Smith September 15, 2016 at 5:03 pm

Valuationguy September 16, 2016 at 10:46 am

Clive September 15, 2016 at 10:35 am

Dean September 15, 2016 at 7:56 am

Mike G September 15, 2016 at 6:49 pm

reslez September 15, 2016 at 1:30 pm

Otis B Driftwood September 15, 2016 at 8:25 am

flora September 15, 2016 at 9:41 am

flora September 15, 2016 at 10:51 am

polecat September 15, 2016 at 12:05 pm

LA Mike September 15, 2016 at 10:10 am

divadab September 15, 2016 at 12:27 pm

Dean September 15, 2016 at 9:31 pm

LA Mike September 16, 2016 at 12:21 am

Yves Smith September 16, 2016 at 5:50 am

LA Mike September 16, 2016 at 9:53 am

Dean September 17, 2016 at 12:25 am

Dean September 17, 2016 at 12:40 am

Bottom Gun September 15, 2016 at 10:39 am

Dogstar September 15, 2016 at 10:48 am

allan September 15, 2016 at 11:05 am

Clive September 15, 2016 at 11:43 am

readerOfTeaLeaves September 15, 2016 at 12:30 pm

allan September 15, 2016 at 12:57 pm

Kris Alman September 15, 2016 at 3:26 pm

LAS September 17, 2016 at 11:07 am

Rick September 17, 2016 at 1:29 pm

Yves Smith September 17, 2016 at 4:19 pm

Rick September 17, 2016 at 9:20 pm

Thursday, 28 September 2017

Thursday, 28 September 2017

a 2015 study published by the Securities Exchange Commission https://www.sec.gov/comments/4-

Thursday, 28 September 2017

first disclosed by The New York Times https://www.nytimes.com/2017/07/27/business/wells-fargo-