The bank’s problems ran far deeper than fake accounts.
I thought it would be a long time before a corporate scandal got bigger and worse than the Volkswagen emissions-cheating mess. I still think that, but almost every day the Wells Fargo situation makes me wonder if it might soon surpass even VW in overall awfulness. The latest news certainly shortens the odds. Before we examine the dismal state of affairs, let’s jump straight to the bottom line: Even if this scandal does not widen further, it reflects a massively broken corporate culture, not just the acts of a few bad men and women. It has trashed the reputation of former CEO John Stumpf and at least casts doubt, fairly or not, on the reputation of his predecessor, Richard Kovacevich; both were among America’s most admired CEOs. The No. 1 job of CEO Tim Sloan is culture change, and the big lesson from others’ experience is not to talk about culture but to model and enforce the right behavior—and to be patient.
Recent developments go way beyond the original revelation, that the bank opened as many as 2.1 million accounts without customers’ permission or knowledge. Lots of people had to know of such widespread wrongdoing, but…
—New evidence suggests that some employees who called the company’s ethics hotline may have been fired or otherwise punished. That’s illegal under federal law. The bank has hired an outside investigator to learn more.
—Branch managers were warned 24 hours before internal auditors showed up to conduct inspections. Employees were sometimes ordered to work into the night or all night to shred documents and forge signatures so the branch would pass inspection, the Wall Street Journal reports.
—The bank allegedly caused customers to miss deadlines for extending a promised interest rate, then charged those customers late fees. The process typically cost customers $1,000 to $1,500. So say four former employees from the Los Angeles region, as reported by ProPublica. One of the four ex-workers claims that total proceeds to the bank were in the millions of dollars.
Especially alarming about that last allegation is that it appears unconnected to the original fake-accounts scandal. The news suggests that, with the bank on the defensive, more employees may feel empowered to report other, unsuspected unethical or illegal practices.
That’s how this could eventually be worse than VW. At the very least, we now have two new epic case studies of scandals and their mismanagement. Watch and learn.