Accountability for Fraud - How Does Nobody from Wells Fargo Go To Jail
If you are a CEO of a Huge Financial Organization, you too can get away with Fraud... At least this is what is implied with the recent Wells Fargo debacle.
In a previous post that I wrote titled The Aftermath of the Wells Fargo Scandal, I discussed how it was recently discovered that Wells Fargo Bank had defrauded over 1.2 million people by opening accounts and credit cards using existing customers information - in some cases without their knowledge.
What has happened so far
- Wells Fargo has agreed to pay a ~185 million dollar settlement to the government after admitting that it's employees opened fraudulent and unauthorized accounts for it's customers.
- Roughly 5,300 Employees who were said to have committed these acts were fired
- $2.6 Million of a total $5 Million already refunded to affected customers for fees and interest charges incurred
- Wells Fargo has put an end to their aggressive retail sales goals that created misaligned incentives which "probably" led to the actions which put the bank in this situation
Is this enough? Why is nobody going to Jail?
By definition FRAUD is the wrongful or criminal deception or the acquisition and use of a person's private identifying information with the intention of using it for financial or personal gain. In this case, it is also known as Identity Theft which carries a maximum penalty of 15 years in prison along with a number of fines.
In the case of Wells Fargo, which probably just committed the biggest example of identity theft, no one is going to jail. The $185 million in fines might seem substantial to us lower income people, but when you look at it from a grand scale, considering Wells Fargo's $5 Billion in Revenue for Q2, it's not very big at all - only 3% - and this has been happening over the past 5 years.
The CEO - John Strumpf continues to say that he is taking full responsibility and accountability for the entire incident, however he has not resigned, he has not returned any of the bonuses he has earned, and instead has done a poor job in providing a resolution to those who were impacted - and at the same time has fired 5,300 people who were probably trying to just meet quotas in order to keep their jobs. That to me is not being accountable.
Summary
- No one goes to jail
- The bank pays a small fine
- The government gets a huge pile of cash
- The victims get some money (roughly $25 per person)
- Life goes on and the same thing happens again and again and again
Watch below as Senator Elizabeth Warren grills CEO John Stumpf at the Senate Banking Committee hearing
Do you think the punishment was enough? Let me know your thoughts?
I think this is why Bitcoin and cryptocurrency is so important. The more we can use systems free from big bank and government control, the more we can find ways that we just don't need the old systems. The banks aren't likely to change until they have some strong competition.
Agree - Im a big supporter of decentralized systems
Amazing how corporatism or crony capitalism is giving free market a bad name... SMH...
Nice post. Up-voted. Following & looking forward to seeing more of your posts. Posted a couple of articles earlier that you and your followers may find interesting.
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"A future without central banking be careful what you wish for because sometimes dreams do come true!!"
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Cheers.
Stephen
Thanks! Checking out your posts too!
Thanks I appreciate it. Stephen
If you are in the club, you are safe. Crony capitalism at work.
Too bad a majority of us are not "in the club"
There is no prison big enough. Too big to fail! Too big for prison!
I just can't get over the irony of DC politicians telling bankers that they ought to be in jail. That's the pot calling the kettle black.
So long as the money taken from these unwitting customers is returned, I'd say that justice has been served. As for Wells Fargo themselves, well, that's where the power of the market can, and should, rear its head. In a marketplace where banking is not so intensely regulated that only a few mega banks exist, reputation would be everything. People should be leaving Wells Fargo in droves (I know I would), and this should significantly impact its bottom line. Whether or not it actually hurts Wells Fargo because it's one of those too-big-to-fail banks remains to be seen, but that's how it would work.
The catch is that some of the people impacted by this were impacted long term in the form of credit score hits. The CEO couldn't answer how those people would be compensated, especially those who are applying for new loans and have to pay a higher interest rate. Ex. Mortgages for the next 30 years of their lives.
I understand, and in many ways this kind of damage is dramatically worse. I would argue, though, that the credit reporting agencies we have are largely a result of the regulatory infrastructure around banking, and thus are party to the problem as well. In this situation, though, you're right: the party responsible isn't going to do much, if anything, to alleviate that cost.
Yup. That's how the legal system works. Money wipes the slate clean. All you have to do is pay a "fine", which is not even close to your revenue and profits usually. This is how toxic waste fines work. Our environment is being continually poisoned, and the companies keep doing it because their profits far outweigh the fine levied against them.
Upped. Take care. Peace.
This is so common it is unbelievable. The CEO will never admit any wrong doing. It is like with Herbalife. They screwed over so many and ultimately had to pay $200,000,000 but that is a slap on the wrist for their global scam that should be shut down. They will just continue to do what they are doing. It is like us getting a speeding ticket.
So true. Im glad he got grilled hard, but he probably just went home to his million dollar house and forgot about the entire incident.
Wonder where's Warren Buffet on all these. If I remember correctly, Bershire Hathaway has quite some bits of shares in this bank.
He can't be too happy being one of the biggest shareholders. I think I read somewhere that he has lost $1.4 billion after the price of the shares dropped.
I'm afraid he could be the type of people who sneeze and give the whole world a cold. Let's hope not.