Running head: WELLS FARGO SCANDAL 1
Wells Fargo Scandal
Mollie Carr, Melissa Rose, Justin Nguyen, and Anthony Lanagan
King University
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Wells Fargo is a well-known financial institution and has been in business for over 150
years. The bank was successful and well-respected until a cross-selling scandal was made public
in 2016. The scandal resulted in lost jobs, litigation, millions in fines, and a hit to Wells Fargo’s
reputation. The scandal serves as a lesson that no business, big or small, is safe from the
monumental consequences of unethical business practices. The below research outlines a brief
history of Wells Fargo, what the offenses were, how Wells Fargo handled the scandal, and how
the company plans to move forward.
History of Wells Fargo, what went wrong, and how Wells Fargo was caught
Wells, Fargo & Co. was founded by Henry Wells and William Fargo in 1852. The company
was created to capitalize on the gold rush that was sending the West Coast of the United States
into a frenzy. Wells Fargo first opened in San Francisco and offered banking services primarily
related to the buying, selling, and transportation of gold. Soon, Wells Fargo spread its operations
to other cities and mining camps across the West. In the 1860s, Wells Fargo’s corporate symbol
became the gold-filled, six-horse stagecoach (“History of Wells Fargo”, 2019).
Nearly 160 years after it was founded, Wells Fargo was still a highly successful and well–
respected financial institution. Customers and bank regulators were mutually impressed with Wells
Fargo’s ability to effectively navigate and operate through the most recent financial crisis. In 2011,
Michael Brosnan, the OCC’s senior deputy comptroller for large-bank supervision, publicly stated,
“While Wells Fargo is a large bank, it is also the quintessential community bank” (Witkowski,
2019). It was later revealed that the OCC had issued five private supervisory letters to Wells Fargo
between February 2013 and July 2016. The letters urged Wells Fargo to correct actions regarding
the bank’s cross-selling practices (Witkowski, 2019).
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In 2013, thirty Wells Fargo employees in the Southern California region were fired for
opening accounts and creating debit and credit cards for customers without their knowledge or
consent. Some employees forged customer signatures in order to complete such transactions. The
actions seemed to be motivated by Wells Fargo’s aggressive target-setting system. Branch
employees were offered monetary incentives for reaching cross-selling and customer service goals.
Personal bankers could receive bonuses around fifteen or twenty percent of their salary and bank
tellers could receive up to three percent of their salary (Tayan, 2019).
Wells Fargo had various controls and polices in place that were designed to prevent such
activities. The company had an ethics program that educated employees on how to identify and
address conflicts of interest. There was a whistle blower hotline that employees could utilize to
inform senior management of any wrongdoing. Senior management was also incentivized to
minimize risk while reinforcing company values. There was also a system in place for the bank to
recoup any ill-gotten bonuses (Tayan, 2019).
Despite the safeguards that were in place, it was later revealed that the cross-selling scandal
was a much larger problem than was previously thought. In September of 2016, Wells Fargo
announced that it would be paying $185 million in fines. The fines would be paid to settle a lawsuit
filed by regulators, the city of Los Angeles, and the county of Los Angeles. Wells Fargo employees
has opened an estimated 2 million new accounts without customer consent over the span of five
years. The employees had often funded the new accounts by transferring money from customer’s
other accounts without their permission (Tayan, 2019).
Reaction and Consequences of Wells Fargo’s actions
Two years ago, the world learned about one of the largest bank scandals ever
committed. Since the scandal broke, Wells Fargo has paid 1.7 Billion in fines and was roasted by
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congress. However, the bank has promised their loyal customers a reckoning will happen (Sainato,
2019). Now that the dust has settled, how have the customers from Wells Fargo reacted since
learning of the many scandals their bank has faced over the past few years? Surprisingly, customers
of Wells Fargo have stood by their bank. After Wells Fargo had created over 3.5 million fake
accounts, Wells Fargo primary checking customers has increased 1.7% from last year (Wolff–
Mann, 2018). For a company that has been under the microscope for fraud, that is an impressive
number. Wells Fargo also showed growth in other area platforms like mobile banking and online
banking has increased 4% from a year ago (Wolff-man, 2018). All great signs that Wells Fargo is
doing well for a bank who recently committed fraud.
However, not all was looking upward for Wells Fargo, consequences other than fines still
