It is a fraud so massive that it is staggering in dimension. 5,300 Wells Fargo employees were fired for opening false accounts. In fact, 2 million false accounts!
What led this fraud to happen? It was pressure. Who applied the pressure? It was the executive who led the Wells Fargo new account unit, a woman named Carrie Tolstedt.
Ms. Tolstedt has been fired for pressuring thousands of retail banking people to “aggressively” sell multiple accounts to its millions of customers; accounts that no one needed and no one wanted. Here is the punchline to the highly unethical joke: for her unethical actions, the bank has awarded Tolstedt 124 million in bonuses.
According to the CEO of Wells Fargo:
“We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers.”
This comes after the bank was slapped with a $185 million fine and had to refund $5 million in fees wrongly charged to customers for the 2 million fake accounts, by the Consumer Financial Protection Bureau.
Personal bankers who have come forward talked of the unbearable sales pressure the bank put on them to meet sales goals and while that is well and good, the personal bankers were complicit in the cascade of bad ethics from the top down.
How does this happen?
How does it come to pass that so many customers were cheated and charged for fake accounts they never opened? Furthermore, how is it that the executive who put the pressure on those 5,300 employees was ultimately rewarded with a $124 million bonus?
Bad ethics!
I do not for a minute think that the practice of creating false accounts – and then charging banking customers for accounts they never wanted was done in a vacuum. There were undoubtedly manner layers of management between Tolstedt and the personal bankers. I cannot imagine that they were clueless as to what was transpiring. For that matter, I cannot imagine those at levels higher than Tolstedt were clueless either.
Was the pressure to boost the stock prices so intense so as to create an infrastructure of deceit throughout the entire company? Undoubtedly so.
Then there is the image that comes to mind of Carrie Tolstedt firing 5,300 employees, then being shown the door but as she is leaving, being handed a pay packet containing $124 million! She was undoubtedly given the bonus as part of a twisted legal agreement. The agreement essentially rewarding her for taking advantage of customers and boosting the stock price.
From top to bottom, many will questions the ethical values of Wells Fargo asking are lacking to nonexistent? It does not take a genius to understand why the banking profession is so disrespected.
There is truly no one within the personal banking side of the Wells Fargo organization who can elicit sympathy. And indeed, I cannot really discern much difference between Carrie Tolstedt and Bernard Madoff. They are both without ethics or conscience.
Though the Wells Fargo organization has promised changes in terms of eliminating sales quotas for its personal bankers, it still does not address the issue of why there is no ethical compass. Obviously, there was no ethical training in place in the past nor does it seem as though there is any commitment to preventing ethical lapses in the future. If there is no ethical intervention, what is in place to prevent this from happening to another area of the company?
We can never assume that because an organization is impressive in its size and financial resources that it is also impressive in its ethics. It is easy to imagine that somewhere within the organization Carrie Tolstedt is still being hailed as a hero. Until an ethical program is put into place, I don’t think anyone can dissuade me from that viewpoint.
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Excellent article Chuck. The only thing I would add is -and “you cant talk yourself out of something you behaved yourself in to” but you can apparently cash in. Big Banking is simply a part of all things “Big” it seems. Big Pharma, Big Tobacco, Big Government, Etc.