Okay, so as far as I can tell, the retail sales culture at Well Fargo was more Glengarry Glen Ross than neighborhood bank. And there was clearly plenty of misbehavior from the top of Carrie Tolstedt’s organization down.
But was it fraud?
Maybe I’ll find out I was wrong, but it appears the overwhelming majority of “fake” accounts were opened for fake customers. That tells me that the sales quotas and incentives were for new accounts, not for revenue generated. There appear to be multiple accounts opened for actual customers and actual credit lines opened, but I still have to ask, how much revenue did the fake accounts create – and how much of an effect could any fake revenue have possibly had on WFC’s financial reporting? If I have a Wells Fargo VISA card sitting in a drawer in some branch somewhere that I know nothing about, I’m not paying interest, I’m not generating transaction fees and I’m not paying overlimit or late fees. Questions about identify theft on the part of the local staffer aside, that account is a draw on WFC’s earnings – not a bump.
Here’s another thought: to the extent that their customer base was artificially inflated, and to the extent that call center provisioning is based on the number of customers, wouldn’t that mean that Wells actually could have been over-provisioning their call center resources, leading to more responsive customer service than they might have had?
For Senator Warren to suggest that CEO John Stumpf give back his earnings and bonuses is pretty rich. Given that Harvard Law hired Ms. Warren largely because of her fraudulent claim to be part Cherokee, when will she be giving back the $300K per class taught that she was “earning” there? That’s a clear case where her revenue did indeed increase dramatically after her false statements.
If anyone should be looking at this, it might be the labor boards in the states Wells has branches, because the sales culture was so fierce and pressure to produce so great. But to the extent their earnings weren’t materially inflated due to the fake accounts, the only fraud here would be on that singular line in their annual report that says, “We have X million customers.” What was the dollar value of that?
It must have been a miserable place to work. And managers may very well have prospered for demanding unreasonable results from the ordinary workers. And Wells’ culture looks like it needs a serious adjustment, perhaps with the assistance of a little-known speaker on business ethics from northern Vermont.
Just don’t call it fraud.