Wells Fargo Scandal Summary

early stages of the scandal, the San Francisco based financial institution was investigated by the local Los Angeles City’s Attorney and California state officials. Preliminary investigations revealed the extent of the fraud and malpractice predated as far back as 2011. As a result, on September 8, 2016, federal investigators followed suit and the Consumer Financial Protection Bureau Agency opened an investigation against Wells Fargo and handed a $185 million penalty to settle the dispute. This settlement would become the largest fine levied in the agency’s history. Of the $185 million, $100 million comprised of fines from the Consumer Financial Protection Bureau (CFPB), $50 million originated from the Los Angeles City Attorney’s Office, and

The then CEO John Stumpf was forced to resign following insurmountable political and public pressure. Federal prosecutors also issued subpoenas and congressional hearings were held, for which then CEO John Stumpf attended. Additionally, on February 21, 2017, Wells Fargo terminated four high level executives involved in the scandalous news. The SEC’s investigation consists of warrants against bank executives for possible violations of GAAP principles and the Sarbanes-Oxley Act for inaccurate accounting practices. The SEC will probe possible violations of employee whistleblowing protection under the Sarbanes-Oxley and Frank-Dodson Act. Lastly, the SEC will scrutinize any securities fraud that may have been committed as a result of withholding private information (insider trading) to investors due to possible accounting malpractice. Currently, the SEC and Department of Justice results are still pending the ongoing investigation. Tomi Kilgore of MarketWatch reported “Wells Fargo investigation into sales practices should be completed before the April 2017 shareholder meeting.” Likewise, Wells Fargo responded following the mandates of the Office of the Comptroller of the Currency by opening

Wells Fargo commenced an extensive television advertisement campaign to reestablish confidence and its public image. It intensified its ads in newspapers and established a presence in major sporting events showcasing its signature horse-drawn carriage ad. According to Mark Folk, a Wells Fargo spokesman, “the advertising reiterates Wells Fargo’s commitment to customers and the steps we are taking to move forward and make things right.” Class action lawsuits have erupted across the country from enraged customers; however, these have been quickly struck down due to mandatory arbitration clauses Wells Fargo customers are required to sign as part of new account opening agreements. Wells Fargo has filed motions for courts to defer any class action lawsuits to arbitration since these arbitration agreements are typically binding and are resolved on a case by case