The Saga of Wells Fargo – Are Banks Reaping What They Sow?

By Whistleblower Richard Bowen

Wells Fargo is once again making national headlines for its less-than-ethical business practices.

Recent headlines bowled me over: Wells Fargo being forced to reinstate employees – whistleblowers – who reported the ethics issues to their superiors, and pay their back pay! Their Board of Directors report decision laying the responsibility of the 2 million plus unauthorized bank and credit accounts on the bank’s former CEO, John Stumpf, and the former community banking executive, Carrie Tolstedt, and levying substantial penalties and I mean substantial! I’m amazed.

The Department of Occupational Safety and Health Administration (OSHA) took some strong steps recently regarding Wells Fargo that has the bank reeling and many observers cheering them on.

On the surface, it looks pretty promising and appears the government is getting tough in holding at least some banks accountable. Let’s hope this is the start of a trend that does not go out of fashion. The decision which concerns a bank whistleblower who was retaliated against and abruptly dismissed could set a precedent for whistleblower cases that stick.

Last week, OSHA announced the largest individual whistleblower award in its history when it ordered Wells Fargo to reinstate a former Los Angeles wealth manager and pay him $5.4 million in back wages.

The manager (name undisclosed) was “abruptly” forced to leave the bank in 2010, after he told superiors he suspected two of his subordinates of bank, mail and wire fraud. The manager also called the bank’s ethics hotline. The results? Even though management encouraged employees to use the hotline, he was fired!

Last year OSHA put Wells Fargo on notice that it was considering asking for the reinstatement of Ms. Claudia Ponce de Leon, a bank manager in Southern California who was dismissed after she blew the whistle on the malfeasance she observed at the bank. This reinstatement also looks promising. Yet as one of my Bank Whistleblower United co-founders and former bank regulator William Black says “it is rare” to see reinstatements.

However, this could all signal a much more aggressive strategic approach by the government. Still, it’s ironic in that it is rare for OSHA to find for whistleblowers. OSHA may be feeling the heat and this is dictating their present decisions. OSHA had internal investigators who were told to close Wells Fargo cases, without really digging deep and fully investigating the banks’ cases of reported malfeasance. Last year, Former Secretary of Labor Tom Perez ordered a review of the bank’s cases and so this may be the beginning of more progress and reinstatements.

The case of Wells Fargo – a bank that flew under the TBTF radar, came to the public’s attention last year when it was fined $185 million to settle initial lawsuits for creating 2 million plus unauthorized bank and credit card accounts to meet unrealistic sales targets.

The fallout? The bank fired 5300 employees who were involved and paid $185 million to settle lawsuits. The bank had ignored years of internal warnings by employees about their aggressive sales practices. Those who spoke up and in some cases went straight to the top to John Stumpf, the former CEO, were fired.

Mr. Stumpf was forced to retire late last year. The  bank’s Board said it would investigate the allegations and follow up on all the facts and make the findings public. (Was there a choice?) The bank faces an additional dozen plus more probes, inquiries and lawsuits linked to the scandals. The Department of Justice and the SEC is also conducting investigations.

An independent board investigation was put in place, with the Board promising to “follow the facts wherever they lead” and to make the findings public.

The results and decision: a scathing 113-page report that makes it apparent that all the warning signs of the problem had been very apparent. Shearman & Sterling, the law firm hired to conduct investigations, interviewed  100 current and former employees and reviewed  35 million documents. They found that the bank was too decentralized with department heads ( which included Ms. Tolstedt ) having virtual carte blanche, given the mantra of “run it like you own it.” They were given the authority to ignore questions from superiors, subordinates or lateral colleagues.

The bank said it would take back more than $47 million in pay from Ms. Tolstedt and $28 million from John Stumpf. This was in addition to the previous canceling of $41 million in stock options from Mr. Stumpf and $19 million from Ms. Tolstedt.

Ethics pays. However, once again, ethics and common sense were not part of this company’s code. The bank offered an “ethics” hotline expressly for the purpose of reporting behavior they suspected as suspicious or fraudulent; then they retaliated against those employees who did just that.

The 2012 Great Place to Work® Institute report claims the stock price growth of the 100 firms with the most ethical cultures outperformed stock market and peer measures by almost 300 percent.  According to  studies, researchers have shown that a firm’s culture is the strongest predictor of how much market value that firm will create for shareholders’ investments. 

Yet, in spite of the evidence, in at least half of our workplaces, employees report seeing unethical or actual illegal practices (Ethics Resource Center). Lapses in ethics costs trust and erosion of employee confidence and customer confidence. Lack of ethics includes financial consequences as you can see from the Wells Fargo debacle – fines, loss of business, bankruptcies, and more. Yet, unethical practices continue, despite the costs.

Is the position taken by OSHA and the Board of Wells Fargo too late? Maybe.

Yet maybe it’s also a step in the right direction.

8 Responses

  1. Great job AnonymousNJ, u exposed obvious bias. All federal and state courts rule same on tender? That doesn’t sound right. He completely makes Wells Fargo the victim in spite of phony accounts scandal etc. On top of ADMISSIONS in settlements. I recently came across article that stated tender must account for damages etc as well. Did you raise affirmative defenses, counterclaims for deceptive practices, fraud etc.

  2. I just leaned Wells Fargo literally has not process to follow the law in 60% of foreclosure cases in CA. More on that I’ll reveal that later.

    They deserve any corrections they rt and then some.

    Dear Anonymous NJ – that is quite an effort. Don’t give up!! Put a Lis Pendens on your home for the appeal (or comparable in your state) should your house sell. This was its protected and could be rescinded.

    Meanwhile – fighting standing in BK court is a different action completely. Different purpose. I don’t see how that could be res judicata. Consider talking to Linda Tirelli in NY. She got the Wells Fargo fraud manual. She also got a ruling in BK court calling the assignments FORGERIES and you can follow her approach and use that case as a precedent.

    Never never never give up.

  3. slight dif since 2008 it is round two for the fraudsters $O$/deep state
    nothing to see here as usual..just hyped hope by yours truly …..LL
    lawyers and courts work together to prop up the deep state
    only a very few win a raffled home…ahh the good life for the Almighty evil
    And The Beat Goes On

  4. @ AnonymousNJ .

    “Why Homeowners Should Be Allowed To Use a Writ of Mandamus Against a Foreclosure Judge Ruling Contrary to State Court Appellate Precedent”

  5. Reblogged this on California freelance paralegal.

  6. Tip of the iceberg

  7. As many here know, I have appealed my case to the NJ Appellate Division after the trial court granted Summary Judgment in favor of the servicer Wells Fargo, based on them showing a fabricated note that they added a blank endorsement to from Washington Mutual in 2010, an Assignment of Mortgage that they fabricated and forged the Notary signature to, and a copy of the mortgage naming MERS as nominee.

    We had rescinded under TILA within 3 years due to disclosure violations, missing right to cancel docs, predatory lending table funded loan per Rev. Z…

    Fannie Mae purportedly owns our loan according to their website and MERS website.

    The servicer Wells Fargo fabricated the assignment AFTER we had already rescinded.

    The Judge denied our TILA Rescission saying we never tendered the money.

    We Appealled his decision and are awaiting the decision …appeal was based on 2 points … TILA Rescission was effective prior to the servicer fabricating the assignment and filing foreclosure complaint …and on lack of standing, plaintiff Wells Fargo lacked standing to foreclose based on the void docs and fraudulent assignment. They failed to name Fannie Mae as the lender on the notice of intent among other things.

    Today I appeared in court in front of the trial court judge on my motion to dismiss based on rule 4:50 …

    Again he stated on the record that we never tendered when we rescinded. And he stated that the missing right to cancel notices are not the disclosures that TILA is speaking about in the 3 year right to rescind …he says its the other things disclosed in the closing papers that discloses the APR, terms, etc.

    He was confused about the 3 year right and kept saying we must have received the disclosures because the refinance went through and we didn’t object or rescind back then.

    The bank lawyer was even more confused saying we didn’t have a right to rescind after 3 years …failing to understand that we rescinded within the 3 years …we are not rescinding right now you dummy.

    I told the judge that Jesinoski addressed the tender issue ..and he said that “was only dicta” and was not part of the holding and decision.
    He then went into a tirade about how “this wouldn’t be fair to the banks if a person was allowed to just rescind a loan after they received the money…and then make the bank have to return the cancelled note and release the lien before the borrower tenders back the money”..

    So I told him …”well now we’re getting to the heart of the matter, you just personally don’t like this law”…”so you’re over-ruling the United States Supreme Court and legislating from the bench”

    He disagreed with me and stated that every other court feels the same way he does and they are all ruling this way, that the borrower must tender first in a TILA Rescission”

    He again repeated that Justice Scalia writing about tender in the Jesinoski decision was “only dicta” and not the holding of that court decision.

    He denied my motion to dismiss …denied my motion to stay the sheriffs sale pending the outcome of my Appeal …

    He said that there is no likelihood of me prevailing on appeal, so there is no need to stop the sheriffs sale pending appeal …

    The sale date is May 23, 2017

    I will now ask the Appellate Division if they will grant me a stay pending appeal.

    The trial judge keeps raising case law precedence that existed prior to Jesinoski ….he says all OF the precedence requires the borrower tender first in order for a rescission to be effective.

    I tried to explain that they also failed to comply in 20 days ..he had no comeback for that.

    He said it was totally unfair and unreasonable to require a bank to take any steps without first seeing that the borrower has tendered the money ….

    I explained that this was a law written by congress to protect borrowers from predatory lending and TILA violations …

    He got angry and told me …”well now you’re throwing around very serious words and accusations and….

    I interrupted him and said “well yes, and that’s exactly why TILA was created , to protect the borrowers”

    He responded by saying “why should the banks have to lose everything because any person could simply say they are rescinding? Why should the bank have to act first and return anything? And then to later find out that the borrower walked away and disappear ever gave the money back? That’s not fair.”

    I said that the banks have The remedy built into the statute, they don’t lose anything if they comply in 20 days”

    He stopped me and ruled against me saying all of the other state courts and federal courts are in agreement that the borrower must tender first

    So it looks like my last desperation move is to ask the Appellate Division to stay the sale pending appeal.

    Otherwise the only way to stop the sale would be by filing a Bankruptcy and argue that Wells Fargo has no secured claim to our home due to the TILA Rescission … But they would argue Res Judicata ..saying this was already litigated in state foreclosure court.

  8. Does anyone have contact info for the board members at Wells Fargo?

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