Wells Admits It Created 1.4 Million More Fake Accounts Than Previously Thought

Remember the outrage one year ago when it was revealed that in its push to pad its top, and bottom line, Warren Buffett's favorite bank had engaged in outright criminal account churning and "cross selling", opening some 2.1 million unauthorized client accounts without permission (subsequently this extended to unsolicited car insurance policies extended on Wells auto loans). Well it turns out there was not nearly outrage, because as the bank revealed this morning, the "real" number was higher. 67% higher.

According to the outside review whose findings were released today, Wells Fargo said employees created two-thirds more bogus accounts than initially thought. According to the review, an additional 1.4 million "potentially unauthorized" deposit and credit-card accounts opened when the bank was encouraging employees to sell multiple products to retail customers, bringing the total to about 3.5 million, according to a statement Thursday from the San Francisco-based firm. The revised estimate covers January 2009 to September 2016, almost twice as long as the period examined in the initial review.

Wells new CEO was, predictably, all apologies:

“We apologize to everyone who was harmed by unacceptable sales practices that occurred in our retail bank,” said Wells Fargo CEO Tim Sloan. “To rebuild trust and to build a better Wells Fargo, our first priority is to make things right for our customers, and the completion of this expanded third-party analysis is an important milestone. Through this expanded review, as well as the class action settlement, free mediation services, and ongoing outreach and complaint resolution, we’ve cast a wide net to reach customers and address their remaining concerns. Our commitment has never been stronger to build a better bank for our customers, team members, shareholders and communities.”

However, as Bloomberg writes, the discovery is "a sign the bank is still struggling to move past a scandal that sparked record fines and congressional investigations." Furthermore, "the disclosure of even more fraudulent accounts threatens to catapult Wells Fargo back into the political crosshairs just as Congress returns Sept. 5 from its summer recess."

The scandal came to light almost a year ago after regulators slapped Wells Fargo with fines of $185 million over its sales practices, prompting congressional hearings and resulting in the bank naming new leaders, clawing back executives’ pay and beginning an overhaul of its retail division.

“New data should cause some lawmakers to re-engage on the issue," Isaac Boltansky, an analyst with Compass Point Research & Trading, told Bloomberg before the new tally was announced. Democrats will again argue it proves Washington needs to keep rules tight on financial firms, while Republicans will continue to fault Consumer Financial Protection Bureau officials for not spotting the misconduct themselves, Boltansky said.

As Bloomberg writes, Wells Fargo had agreed to expand its review after Washington lawmakers lambasted the company following former Chief Executive Officer John Stumpf’s testimony last September about the bank’s sales practices. Under pressure, the bank agreed to review records dating back to 2009, rather than through 2011 as it initially did.

The company said it has paid or identified $10.7 million in customer compensation related to the investigation. The figure includes $7 million of refunds, up from $3.3 million the bank had previously disclosed. It also includes $3.7 million related to what it described as the “complaints process/mediation.”

 

“Today’s announcement is a reminder of the disappointment that we caused to our customers and stakeholders,” CEO Tim Sloan said on a conference call Thursday with reporters. “We apologize to everyone who was harmed by unacceptable sales practices that occurred in our retail bank.”

 

Democrats led by Representative Maxine Waters of California earlier this month called for a House Financial Services Committee hearing about a separate scandal at Wells Fargo involving unwanted car insurance imposed on auto-loan customers. And Senator Elizabeth Warren of Massachusettswrote to the Federal Reserve to again press for the removal of board members who served during the original accounts review period of 2011 to 2015.

Today's revelation was partially expected: in March the bank warned investors that its initial bogus-accounts estimate was probably too low, saying in its annual filing that a new search by a third-party firm “could lead to, among other things, an increase in the identified number.”

Wells Fargo has worked to minimize the impact of the new tally, describing the additional accounts as those it couldn’t rule out from lacking customer authorization.

The company said in the statement that it "erred on the side of its customers during the review", so the figures might include some accounts that were properly authorized. When it fined Wells Fargo last year, the CFPB ordered the bank to identify all customers affected by its sales misconduct and set aside $5 million for those harmed.

On the other hand, the new review doesn’t go back as far as 2002, the year that executives first knew about the sales misconduct and fired employees over it, according to investigators hired by the company’s board. Lawyers representing customers who said they were harmed by the bank’s abusive sales practices claimed in a lawsuit that Wells Fargo employees probably created 3.5 million bogus accounts starting in May 2002. Wells Fargo is awaiting final approval to settle that case for $142 million.

Comments

swmnguy jcaz Thu, 08/31/2017 - 10:56 Permalink

For regulators to regulate the Finance sector would be pinko commie socialist fascist America-hating libtardism, don'tcha know.The fact that the Board of Directors and all C-level executives of Wells Fargo, going back at least 5 years, are not wearing pink underpants in an outdoor tent-city jail is all the proof one needs to know that America is not a nation of laws, but a nation of Oligarchs.We must all remember what Lanny Breuer told PBS Frontline in the aftermath of the 2008 meltdown, to the effect that they couldn't possibly prosecute financial fraud because the finance sector was huge, controlled a lot of money, and accounted for a lot of jobs. That said it all, pretty much. 

In reply to by jcaz

Al Huxley Thu, 08/31/2017 - 09:42 Permalink

They're just lucky that lying, cooking the books and defrauding customers and shareholders is legal in this country, otherwise they'd be fucked.

NumNutt PT Thu, 08/31/2017 - 10:12 Permalink

The best advice I was given when I was  young and fresh on the seen, from an older friend that was a business owner was this - When just starting out in business for yourself, do what ever it takes, legal and illegal, to become established. At that point, if you haven't been caught go ligit and you will be successful. If you try and start a business by the book, and follow all the laws and regulations, you will fail.The laws and regulations have been put in place by the people that made it to the top in an industry to keep new competition in check. Always remember that.

In reply to by PT

Honey-Badger (not verified) Thu, 08/31/2017 - 09:43 Permalink

You won't see this in the MSM, they will memory hole it. Banks can do no wrong, they are the cornerstone of (((capitalism))) don't cha know!

YUNOSELL Thu, 08/31/2017 - 09:43 Permalink

1.4 million additional fraudulent accounts created? How many million was it originally thought they created? They must have designed an algo to create all these fake accounts.   LOL, Wells Algo

YUNOSELL Thu, 08/31/2017 - 09:47 Permalink

Criminality in finance has become the norm. I think if a bank or the government actually did the right thing and prosecuted the fraud to truly eliminate moral hazard so every banker feels they could be the next target, the shock in so many decision changes on market strategy would crash the market and collapse the system

Calculus99 Thu, 08/31/2017 - 09:47 Permalink

Karl 'Douchebag' Denniger makes a good point re all this fraud.Why should smaller entrepreneurs bother crating new businesses these days when the large one's are so corrupt and protected so making it very hard to compete against them. 

Calculus99 Thu, 08/31/2017 - 09:51 Permalink

Folks, if you're not a very senior exec and work in a finance company you're strongly advised to carry a small Sony recorded in your pocket (can record 24hrs, easy to download to your pc) because if/when the shit hits the fan, it's people like you that will be thrown under the bus...You therefore need something to use if need be against your sociopathetic bosses.

Mena Arkansas Thu, 08/31/2017 - 09:58 Permalink

Where's asset forfeiture now? Just seize all the Wells Fargo assets and let them sue to get them back. You know, like they do to the serfs.And how about RICO? Fraud this widespread is undeniably racketeering and the perps and their bosses need to be prosecuted.And quit letting the TBTF banks buy their way out of their swindles by paying 5% fines on their ill-gotten loot.They need to go to jail. And not country club feds. General population with the dindus.

Bastiat Mena Arkansas Thu, 08/31/2017 - 12:33 Permalink

By 2008 it was clear that the banking system had devolved into systemic racketeering and nothing would be done about it.  The next step is for bank security guards to rob people at the ATM so the bank can recycle the money back into the machine (they get to keep 5% as an incentive.   A relatively small step from what Wells has been doing. 

In reply to by Mena Arkansas

Solio Thu, 08/31/2017 - 09:59 Permalink

Corporations gone criminal to maximize plunder and pay no taxes. They get a pass with the criminals in congress because they share the loot with them through campaign contributions.