The Fake Accounts Scandal Continues
Despite the resignation of CEO John Stumpf, Wells Fargo & Co (NYSE:WFC) continues to have problems with regulators. California’s attorney general, Kamala Harris, has decided to investigate the bank on allegations of criminal identity theft related to the unauthorized creation of customer accounts.
The California Department of Justice sent a search warrant to Wells Fargo’s San Francisco headquarters this month. It was delivered on October 5, and later exposed by the Los Angeles Times after they filed a freedom of information act (FOIA) request. The scope of the warrant includes files and documents.
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According to the warrant, there is probable cause that felonies were committed at the bank. (Source: “Wells Fargo investigated by California for possible identity theft,” Los Angeles Times, October 19, 2016.)
Wells Fargo has been mired in scandal ever since it was discovered that employees had created over two million fake accounts and credit cards without notifying customers. Then-CEO Stumpf was even hauled in front of Congress for hearings.
Senators of both parties questioned his lack of oversight, particularly in relation to the practice of “cross-selling.” Employees at major banks are encouraged to “cross-sell” additional products that customers may find useful. Incentives are put in place to reward the best cross-sellers.
While most banks average fewer than three cross-sells per customer, Wells Fargo asked employees to land eight products per customer. Senator Elizabeth Warren hammered this point home in the Stumpf hearings, calling it a “scam” that should be subject to criminal investigations.
Even after Stumpf retired, Senator Warren continued to demand greater accountability. (Source: “Sen. Elizabeth Warren goes on tirade after Wells Fargo CEO John Stumpf retires,” CNBC, October 12, 2016.)
“As I said: @WellsFargo CEO Stumpf should resign, return every nickel he made during the scam, & face DOJ/SEC investigation. He’s 1 for 3,” she tweeted. “A bank CEO should not be able to oversee a massive fraud & simply walk away to enjoy his millions in retirement.”
No doubt she would be happy to note that California’s attorney general has opened a criminal probe into the bank’s activities. Coincidentally, Harris is in the midst of an intense election. She is currently running to become the junior senator for the State of California.
