The Wells Fargo and Company fake accounts scandal
The Wells Fargo is an American international firm, basically based in California that operates throughout the world. It was founded by Henry Wells and William Fargo in the year 1862 in the New York city. What makes this firm stand out is that it is the second largest bank in the world, as per its value and the third largest company in America, according to the value of its assets.
However, all that glitters is not gold! In the year 2016, something went utterly wrong with this firm. And this made the company lose everything it had, from its value to the investors, its market position and else. The interesting point here is that the Fargo firm still stood out, but for all the wrong reasons now! So what did exactly happen?
In 2016, the company was found suspicious of manipulating its accounts, by opening fake accounts, thus, leading to huge but false numbers on its balance sheet. The basic idea was to show huge sales and business while the actual figures were not even close.
This placed the firm under investigation by the California attorney general for alleged criminal theft and the findings were shocking to the world. It was revealed that the company was operating almost 2 million fake accounts, most named after its employees. Besides, it was also found out that there around 1.5 million bank accounts and credit card accounts created by the employees of the company in the name of some customers, without even them knowing about it.
This was done to receive sales targets and bonuses. The story doesn’t end here. The employees went to the heights of creating fake email addresses and phone numbers to open the accounts, making sure that the ‘fake’ ones operate like any other account.
As huge as this scandal seems, ‘the process was a very simple one’, said the employees. They just moved the funds from the customers’ original accounts to the false ones, without their knowledge and consent and the job was done! They said that this practice was widespread; something like a normal routine function or the nature of the bank. Further, these customers were charged for insufficient funds, annual fee, interest charges, overdraft fees, and thus, this ‘large’ bank made money. Almost $4,000,00 million were extracted from the customers this way.
The employees who opened these accounts told the investigators that, for them, it was not a new story and that the scandal had been going on for long enough. It was estimated that the bank got indulged in these activities way before in 2007!
Post this, when the Justice Department of America went to the depths of the incident and reached the conclusion, almost 2 million accounts were shut and around 6000 employees were fired. During the investigation, the bureau also came across some employees who didn’t agree to the ‘work standards’ of the company and had to lose their job. They said that it took a huge chunk of their income and efforts to let go of something so big.
However, now that the case turned upside down, the company was asked to compensate all the employees and customers that it had cheated on. Now, this meant trouble since it meant that the Fargo group would have to spend about $110 million to make up for what it had done.
Initially, the company even tried to defend itself by forcing people to make a reversal statement of what they had said and prove that it is a fake lawsuit. However, the trick didn’t work out too well and the Wells Fargo decided not to enforce such arbitration clauses and went for the settlement instead.
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