Wells Fargo Paying $3 Billion To Settle U.S. Case Over Illegal Sales Practices The bank agreed to settle charges brought by the Justice Department and the Securities and Exchange Commission over accounts, debit cards and other products that customers did not request.

Wells Fargo Paying $3 Billion To Settle U.S. Case Over Fraudulent Customer Accounts

  • Download
  • <iframe src="https://www.npr.org/player/embed/808205303/808275217" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

AUDIE CORNISH, HOST:

Wells Fargo has agreed to pay $3 billion to settle federal charges that the bank engaged in fraudulent sales practices for more than a decade. The bank has acknowledged setting up millions of checking accounts, debit accounts and other financial products that customers never asked for. Prosecutors say the fraud was carried out by thousands of Wells Fargo employees who were under pressure to meet aggressive sales targets. NPR's Scott Horsley joins us now.

Welcome back.

SCOTT HORSLEY, BYLINE: Hi, Audie.

CORNISH: Three billion sounds like a major fine, but we're talking about a bank. So how big a hit is this?

HORSLEY: You know, this settlement was announced after the market closed, but it had been rumored while traders were still busy. And Wells Fargo investors seemed to welcome this deal. The bank shares actually gained about three-quarters of a percent today on what was generally a down day for Wall Street.

Three billion dollars is roughly equivalent to the profits that Wells Fargo recorded in its most recent quarter. Now, prosecutors say this fine is appropriate given what they call the staggering size, scope and duration of this scheme. Nick Hanna, who is the U.S. attorney in Los Angeles, said Wells Fargo managers were aware of the illegal conduct all the way back in 2002, but they looked the other way and allowed it to continue until 2016.

(SOUNDBITE OF ARCHIVED RECORDING)

NICK HANNA: Simply put, Wells Fargo traded its hard-earned reputation for short-term profits and harmed untold numbers of customers along the way.

CORNISH: What was the bank's motivation? I mean, we talked about the idea that employees were, like, under pressure for sales targets.

HANNA: Right. The Justice Department says a cornerstone of Wells Fargo's business model during this period was what they called the cross-sell strategy, in which existing customers were encouraged to open new accounts and buy other financial products. Now, there's nothing wrong with that in principle if you're giving customers what they want, but prosecutors say in this case, the bank set really aggressive sales targets. And to meet those targets, bank employees wound up giving customers products they didn't want and didn't even know they were getting. The facts spelled out in the settlements say bank employees would often open accounts in customers names without their knowledge or consent, sometimes forging signatures, moving money from the customer's other accounts, even altering customer's contact information so they wouldn't be called by other bankers and accidentally tipped off to the scheme.

Now there were red flags early on. Investigations by the bank itself flagged this conduct years ago. They called it a growing plague. They warned it was spiraling out of control. But those warnings were ignored, and Hanna says the case illustrates what he called a complete failure of leadership at multiple levels.

CORNISH: There was so much criticism of that bank's leadership. What's happened to them?

HORSLEY: Already there have been a lot of changes. There's a new CEO at Wells Fargo, and he said today he's committing all necessary resources to make sure nothing like this happens again. They've also shuffled their board of directors. And those changes in leadership are one reason the Justice Department agreed not to pursue criminal charges against Wells Fargo as a corporation. That does not preclude future prosecution, though, of some of the individuals who were involved. The company's former CEO John Stumpf has already been hit with a big regulatory fine, and he's been barred from the banking industry for the rest of his life.

CORNISH: And what about Wells Fargo customers?

HORSLEY: They are not getting any of this $3 billion. Wells has paid other fines and settlements over the years that are intended to compensate customers who either had to pay account fees for accounts they didn't want or suffered other financial harm. But prosecutors say this fine is really a - it's not about compensation. It's about punishing the bank and deterring this kind of behavior in the future. So half a billion of the $3 billion is going to go to the Securities and Exchange Commission for distribution to Wells Fargo investors, and the other $2 1/2 billion is going to go to the U.S. Treasury.

CORNISH: That's NPR's Scott Horsley.

Thanks for your reporting.

HORSLEY: You're welcome.

(SOUNDBITE OF TORTOISE'S "TEN-DAY INTERVAL")

Copyright © 2020 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.