Though it was only in late 2016 that the world learned about the fraudulent ways of Wells Fargo, the nation’s fourth-largest bank had been a part of a scam for many years, where employees opened millions of savings and checking accounts in the names of actual customers, without their knowledge or consent. According to Justice Department officials, the scheme had lasted over a decade and was carried out by thousands of employees who felt pressured to meet quotas.
The ongoing controversy had a new development recently, where Wells Fargo has agreed to admit wrongdoing and pay a whopping $3 billion to resolve investigations into the long-running fake-account scandal. As part of the deal, the bank fortunately avoids criminal prosecution. The payment also includes a $500 million civil penalty to be distributed by the SEC to investors. Last year the bank had reported a net profit of $19.5 billion in comparison.
The Securities and Exchange Commission has said $500 million of the settlement would be used to compensate investors who responded to the bank’s promotion of its “cross-sell” strategy. “We take seriously the rights of customers, creditors, and investors, all of whom were harmed by this conduct, where the bank was making up sales activities to get a competitive advantage over its customers,” remarked a senior Justice Department official.
U.S. Attorney Nick Hanna remarked, “This case illustrates a complete failure of leadership at multiple levels within the bank. Wells Fargo traded its hard-earned reputation for short-term profits, and harmed untold numbers of customers along the way.” He also said, “We are hopeful that this $3 billion penalty, along with the personnel and structural changes at the bank, will ensure that such conduct will not reoccur.”
The San Francisco-based bank has struck a three-year deferred prosecution agreement to resolve a criminal investigation into false bank records and identity theft. Wells Fargo must abide with terms of the agreement, to avoid prosecution, including continuing to cooperate with ongoing investigations. Wells Fargo admitted that it had collected millions of dollars in fees and interest that it should not have collected, harmed the credit ratings of customers, and unlawfully misused customers’ sensitive personal information.
Earlier this year the Office of the Comptroller of the Currency said that former Wells Fargo CEO John Stumpf, who managed the company during the peak of the scandal, has been barred from working at a bank again. Stumpf will pay $17.5 million for his role in the scam.