Supervisors Consider Using $25M Wells Fargo Settlement to Investigate Other Consumer Protection Violations
Los Angeles County officials are considering how to spend $25 million in legal penalties levied on Wells Fargo, with some proposing Tuesday, Nov. 22 that a new litigation division be set up to target violators of consumer protection laws.
The bank is set to pay $50 million in civil penalties to resolve litigation involving bank accounts set up without customers’ permission. The money, to be split between the county and city of Los Angeles, is in addition to at least $135 million in penalties paid to two federal agencies over similar allegations.
The payments settle a lawsuit brought by City Attorney Mike Feuer, filed after the Los Angeles Times reported that fake accounts were created without customers’ knowledge and caused them to rack up bank fees.
Supervisors Hilda Solis and Mark Ridley-Thomas pointed to Feuer’s success as potential justification for setting up a unit of county attorneys targeting those who routinely ignore consumer protections.
By law, the funds must be used by either the District Attorney or County Counsel. However, the money could be spent on a wide range of efforts, including enforcing minimum wage violations, battling fraudulent immigration consultants, expanding legal assistance centers, identifying theft among foster youth or establishing a Center for Financial Empowerment, according to the
The Los Angeles City Council recently budgeted roughly $5.8 million to fund Feuer’s consumer protection division.
Wells Fargo officials have said the agreements were made with its customers in mind and out of a desire to show accountability.
“Wells Fargo is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request,” the company said in a statement issued in September when the settlement was announced.
“Our entire culture is centered on doing what is right for our customers. However, at Wells Fargo, when we make mistakes, we are open about it, we take responsibility and we take action. Today’s agreements are consistent with these beliefs.”
The Consumer Financial Protection Bureau, one of the federal agencies that also reached a settlement with Wells Fargo, alleged that the bank opened hundreds of thousands of deposit and tens of thousands of credit card accounts without their customers’ knowledge or permission.
The fake accounts were set up by bank employees to achieve sales goals and reap financial incentive rewards, and the bank fired about 5,300 employees as the result of the allegations, according to the CFPB.
The Board of Supervisors asked for a report back in 60 days.
The scandal surrounding Wells Fargo Bank’s glaring unethical behavior towards its customers is only one of too many scandals involving corporate bad behavior.
It makes us wonder what our business schools are teaching their MBA students about corporate responsibility and ethics these days.
Wells Fargo CEO John G. Stumpf was far from contrite when he “apologized” for the bad actions of supposedly overzealous company employees he claims acted independently to open millions of unauthorized banking accounts and purchase company services, in the process defrauding customers of millions of dollars in unauthorized fees that fraudulently pumped up the financial institution’s bottom line.
Those unethical actions also served to increase bonuses to the company’s top executives, who face no real penalty for their part in the scandal, including failing to provide the oversight that could have/should have, caught the misdeeds and corporate culture that made it possible.
We have to wonder if Stumpf believes American consumers will feel comforted and vindicated by him throwing the company’s lowest paid employees, the Wells Fargo sales force, under the bus while the executives who engineered the sales quota plan that put pressure on the employees in the first place, walk away with hundreds of millions of dollars in corporate bonuses.
The $185 million in fines and penalties the company will pay are just a drop in the bucket for the company. Sadly, employees at the lower end of the company’s pay scale and consumers will likely bare the burden of making up the financial loss.
Regardless of how large the fines are, they will probably do little to stop the casino mentality of Corporate America. Not until the executives who not only allow but also often promote abusive corporate behavior start to go to jail or are forced to suffer large personal financial penalties, will we begin to see a change in corporate behavior.
It’s been less than a decade since the near collapse of the country’s financial institutions that led to the Great Recession and the loss of millions of jobs, pension plans and foreclosed homes. The Wells Fargo debacle is a stark reminder that financial institutions still need close oversight.
Unfortunately, Stumpf and his executives aren’t the only bad actors among American corporations. Efforts by Republicans to unwind tougher banking regulations under Dodd/Frank, reforms following the financial melt down to curtail excessive bad and speculative practices by the nation’s big banks are ongoing.
It’s time our elected officials stand up and acknowledge the bad actors in our economy, including banks and pharmaceutical companies, and reign in their abusive practices, even if it means sending some executives to jail.
Mexican singer Ana Barbara sued Wells Fargo Thursday, alleging two employees looted more than $400,000 from her accounts and forced her to lose another $884,000 after she had to cancel a concert tour.
Barbara, 45, filed the lawsuit in Los Angeles Superior Court, also naming as defendants Wells Fargo employees Arturo Arias and Jorge Valdez. The allegations include negligence and deceit. She seeks more than $1.5 million in damages.
The bank is “well-known for creating a corrupt business culture which pressures its employees to lure customers into setting up multiple undesired accounts … thereby maximizing Wells Fargo’s profits while at the same time exposing its customers to needless costs and injuries,” according to the lawsuit.
Wells Fargo also has “adopted the practice of enrolling its customers in online banking and online bill paying without their consent,” the suit alleges.
A Wells Fargo representative did not immediately reply to an email seeking comment.
The suit states that Arias, a fan of Barbara’s who had attended some of her performances, approached Barbara in April 2012 and “then proceeded to insinuate himself into (her) circle of friends and associates.”
Arias convinced Barbara to open up a personal checking account at a Wells Fargo branch in January 2013 by going to her home and having her sign the agreement there, the suit states. Two months later, Arias talked Barbara into establishing a business checking account linked to a savings account in the name of her corporation, Lo Bosque Productions Inc., the suit states.
In about May 2013, Arias began using Barbara’s personal identification information to steal money from her two checking accounts, the suit alleges. He created passwords known to him that prevented the entertainer from having access to her own accounts, the suit states.
In January 2014, Arias and Valdez opened a line of credit in Barbara’s name, the suit states. The two conspired to forge Barbara’s signature, according to the complaint.
Together with other Wells Fargo employees, Arias also opened credit and debit card accounts in Barbara’s name, the suit states.
“Arias and Valdez caused over $416,000 of Barbara’s funds fraudulently to be transferred away from Ana Barbara and into Arias’ hands … for his benefit,” the suit alleges.
Barbara’s credit was damaged “to the point where she is unable to obtain ordinary financing for her purchase of a new home,” according to the complaint.
Arias and Valdez confessed to their alleged wrongdoing last August, the suit states. A month later, Wells Fargo created a new checking account in Barbara’s name without telling her and deposited nearly $127,5000, apparently to reimburse her for a portion of the money allegedly stolen by Arias, the suit states.
Barbara, whose real name is Altagracia Ugalde Motta, is considered a major figure in the modern Grupero genre and she has an international following.