Wells Fargo Scandal Leads to Two Board Resignations

On March 9, Wells Fargo announced two resignations from its board, including its Chairwoman Elizabeth A. Duke. She had served on the Board since 2016 and was elected chair in 2018.  What prompted the resignations was a report by the House Financial Services Committee.  The Committee is not done with its investigation of the Bank, because even after Wells reached a $3 Billion settlement with the Department of Justice and the Securities and Exchange Commission, it apparently did not fully abide by it.

All this stems from the fact that for more than a decade, thousands of employees falsified records, forged signatures, and misused customers’ information to meet sales goals….they opened accounts customers apparently did not want or authorize.

The Bank is still profitable. Sacrificing members of the Board may or may not appease Congress and Maxine Waters the Chair of the Committee. Wells Fargo is undergoing something of a change of administration at the top as a result of all this and that is fine as far as it goes. It is good to see that people actually are being forced to account.

Still, you really do have to wonder how all this got this far. Not only did the scandal go on for 10 years, but even after the Bank got caught they did not abide by the fix? Sub Committee Chair Congressman Al Greene provided a statement on the Bank. He made clear that Congress was upset with the Bank’s failure to abide by the terms of the settlement agreement as well as regulatory failure to hold the bank to account. The congressman was careful to note that the victims of this kind of fraud are those of us who must rely on a bank and are in no position to take on a behemoth on our own.

Banks have a lot of power. Anyone who has ever tried to file either an SEC claim or a False Claims Act case against a Bank that has acted in a manner that seems well, wrong, can tell you that regulations do not always favor the consumer.

However, now the SEC whistleblower program allows for anonymous reporting. Such a report could arguably have helped expose the bank both in their original fraud and with respect to their unwillingness to abide by their settlement agreements. It may have meant several reports hitting the SEC all at once.

Unfortunately, the actual whistleblowers in the original Wells Fargo fraud tried to stop it by reporting the fraud internally and suffered retaliation for their efforts. Jesse Guitron first attempted to blow the whistle back in 2008 and unfortunately for her, there was no anonymous SEC program back then. Weep not for the Chairwoman of the Board who had to resign. Instead, consider the whistleblower who tried to save the rest of us from a $3 billion fraud.

Hopefully going forward, those who can blow the whistle in such a case can use the SEC program, remain anonymous, and be able to continue with their careers. The safety and the security of our banking system is at risk when it takes ten years for a scandal like this to unfold, even after a settlement is reached see the Bank apparently not abide by a settlement.

The House Committee at least is trying to make sure this can not continue and the resignation of the Chairwoman may not be the end of this.