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Wells Fargo’s $185 million fine by federal and state bank regulators for the widespread illegal practice of secretly opening unauthorized deposit and share account would almost be funny if it weren’t so revolting. The credit union industry has been buzzing about the outrage about 5,000 of the bank’s employees essentially defrauding their customers all for the sake of hitting their compensation incentives. Outrageous? Yes. Surprising? Not so much.

After the financial meltdown ten years ago, Congress created the Consumer Financial Protection Board (CFPB), a multi-headed monster to originally oversee the “too big to fail” banks, which include Wells Fargo, to ensure the banks’ financial shenanigans would not recur. According to the CFPB’s press release announcing the fine, “…employees boosted sales figures by covertly opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges.”

Prior to working at 1st Nor Cal, I audited credit unions for over ten years. Auditors have a word describing covertly opening accounts and unauthorized funds transfers: Fraud. It’s really that simple. Creating phony accounts for the purpose of personal financial benefit is fraud. My bosses at the CPA firm asked us to tiptoe around the “F” word and use less provocative terms such as unauthorized, erroneous, nonexistent, improper, and misleading. Make no mistake. What Wells Fargo did was commit Fraud, with a capital “F.”

These 5,000 employees were fired. However, these employees didn’t independently come up with this scheme. Someone, probably originating high up in Wells’ bloated bureaucracy, was the brains of this policy. Has this person or persons been identified? Have they been fired? Has anyone involved in this debacle been convicted of fraud and thrown in a prison cell?

Sadly, the likely outcome is that there will be no senior executives getting punished. Besides the monetary fine which includes refunds to more than one million affected customers, the bank must hire an independent consultant to conduct a thorough review of its procedures and require employees to undergo ethical sales training.

The largest banks have been using unethical sales tactics for years. Most don’t get caught. The few that do merely get a slap on the wrist. While $185 million is hardly a slap, it won’t affect their business plan or profitability going forward. Senior management will still get their large salaries and stock options. I will be looking to see how many customers close their accounts to protest these corrupt actions. Sadly again, most people don’t pay attention, so the loss of accounts will hardly register a blip. The only way to stop bad behavior is to hit them where it hurts-in the old money belt.

David M. Green
(925) 335-3802