Is Wells Fargo a Criminal Enterprise?

6 | By Shah Gilani

Something is really wrong with Wells Fargo & Co. (NYSE:WFC), the third largest bank in the United States by assets and the eleventh biggest bank in the world.

After being hit with massive fines and paying out tens of billions of dollars to settle a litany of charges, Wells Fargo’s facing more investigations from the U.S. Department of Justice (DOJ).

And there’s no doubt that this will be the last of them.

So, I ask you, is Wells Fargo a criminal enterprise?

Before you comment, here’s my answer, what I think should happen to Wells Fargo, and how crooks like the ones at Wells are going to bring the economy to its knees…

Meet the New Boss, Same as the Old Boss

The latest DOJ investigation into Wells Fargo’s nefarious behavior centers on its wholesale banking unit, the side of the bank that deals with corporate customers.

The bank’s internal review discovered widespread problems in the wholesale unit’s business banking group, which focuses on companies with annual sales of $5 million to $20 million.

Back in 2015, Wells was slapped with a consent order from the Office of the Comptroller of the Currency (OCC). Because tens of thousands of documents the bank had to have on file to fulfill regulatory “know your customer” rules, specifically designed to thwart money-laundering activities, including controls and processes for ensuring that there are proper identification documents and the bank has the ability to see client activities across a common database were missing or “non-existent,” Wells was forced to consent to fixing the problems.

When the OCC issued the consent order, Wells Fargo had more than 100,000 customer accounts it needed to verify.

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The deadline to comply with the order was June 30, 2018.

In May, Wells formally asked the OCC for an extension, triggering the attention of the Justice Department.

Apparently, the bank’s efforts to reach thousands of clients to update addresses or dates of birth failed for reasons yet to be determined.

However, there were thousands of completed document files, which, upon internal review, the bank discovered were fraudulently updated.

After discovering problems with altered documents initially in the wholesale banking unit’s business-banking group, Wells found similar problems in its commercial banking division, which serves middle-market companies, and its corporate trust services group, which helps with the administration of securities issued by companies and governments.

The DOJ, besides investigating the actions of employees, wants to learn if there’s a pattern of unethical and potentially fraudulent behavior tied to management pressure.

(I say, probably not. I’m sure hourly and salaried back-office employees just wanted managers to get bigger bonuses while risking their jobs and jail for toasters or TGI Friday’s gift cards.)

This latest investigation comes on the heels of the Justice Department looking into what the U.S. Department of Labor (DOL) is examining, how Wells has been pushing participants in low-cost employer 401(k) plans to roll into more expensive individual retirement accounts (IRAs) at the bank.

Banks – and Wells isn’t the only one – have programs aimed at rolling over existing 401(k) plans into IRAs using proprietary products or third-party offerings that have revenue-sharing agreements that generate big fees.

There Will Be More…

Another current investigation is centered on a tax-credit program created during the 1980s where federally funded tax credits used to help build subsidized housing are handed out to developers, who receive bids for the credits from banks and investors to offset income taxes.

Banks are the biggest buyers of the credits because they not only receive a tax write-off, but also get credit under the Community Reinvestment Act, which requires banks to invest in poorer neighborhoods where they have customers.

In 2017, Wells announced it had invested $9 billion in the program during the past five years.

The Department of Justice is looking into whether Wells Fargo colluded with developers to drive down the price of the credits over the past decade. In return, Wells Fargo would offer the developers better loan terms or agree to fund less desirable deals.

Wells is alleged to have made the price of tax credits on one deal contingent on what it would pay for tax credits in other deals. By law, each deal is supposed to be bid individually.

Those are only the three latest investigations into Wells Fargo’s criminal behavior. The following excerpt only covers fines and settlements for bad behavior – most of it technically criminal behavior – recorded since 2013.

Here’s the excerpt from the Corporate Research Project, detailing the charges against Wells.

    In January 2013, Wells Fargo was one of ten major lenders that agreed to pay a total of $8.5 billion to resolve claims of foreclosure abuses. A few months later, Wells Fargo settled a lawsuit alleging that it neglected the maintenance and marketing of foreclosed homes in black and Latino areas by agreeing to spend at least $42 million to promote home ownership and neighborhood stabilization.

    In October 2013, Freddie Mac announced that Wells Fargo would pay $869 million to repurchase home loans the bank had sold to the mortgage agency that did not conform to the latter’s guidelines.

    In December 2014, FINRA fined Wells Fargo Securities $4 million as part of a case against ten investment banks for allowing their stock analysts to solicit business and offer favorable research coverage in connection with a planned initial public offering of Toys R Us in 2010.

    In March 2016, the SEC charged Wells Fargo with defrauding investors in a municipal bond offering to finance 38 Studios, a Rhode Island startup video game company founded by former Boston Red Sox pitcher Curt Schilling that eventually went bankrupt, leaving the state on the hook for $75 million in debt.

    In April 2016, the Justice Department announced that Wells Fargo would pay $1.2 billion to resolve allegations that the bank certified to the Department of Housing and Urban Development that certain residential home mortgage loans were eligible for Federal Housing Administration insurance when they were not, resulting in the government having to pay FHA insurance claims when some of those loans defaulted.

    In August 2016, the Consumer Financial Protection Bureau announced that Wells Fargo would pay a penalty of $3.6 million plus $410,000 in restitution to customers to resolve allegations that it engaged in illegal student loan servicing practices.

    In September 2016, the CFPB imposed a fine of $100 million against Wells Fargo in connection with the revelation that for years bank employees were creating more than two million new accounts not requested by customers, in order to generate illicit fees. The company also paid $35 million to the Office of the Comptroller of the Currency and $50 million to the City and County of Los Angeles.

    The case generated a major scandal, and the bank’s CEO John Stumpf was denounced in a Senate hearing and then one in the House. He was forced to return about $41 million in compensation, but this did not diminish the controversy. The California Treasurer announced that the state would suspend many of its business dealings with the bank; Chicago later did the same. Stumpf subsequently gave in to the pressure and resigned. The bank later clawed back an additional $75 million from Stumpf and another former executive.

    In a separate case, Wells Fargo agreed to pay $50 million to settle a class action lawsuit alleging that the bank overcharged hundreds of thousands of homeowners for appraisals ordered after they defaulted on mortgage loans.

    In April 2017, Wells Fargo was ordered to provide $5.4 million in back pay, damages and legal fees to a bank manager who had been terminated in 2010 after reporting suspected fraudulent behavior to superiors and a bank ethics hotline.

    In July 2017, it was revealed that more than 800,000 customers who had taken out car loans with Wells Fargo were charged for auto insurance they did not need.

    Several weeks later, the bank disclosed that the number of bogus accounts that had been created was actually 3.5 million, a nearly 70 percent increase over the bank’s initial estimate.

    In February 2018, the Federal Reserve took the unprecedented step of barring Wells Fargo from growing any larger until it cleaned up its business practices. The agency also announced that the bank had been pressured to replace four members of its board of directors.

    In April 2018, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau fined Wells Fargo a total of $1 billion for selling unnecessary products to customers and other improper practices.

    In May 2018, Wells Fargo agreed to pay $480 million to settle a class action lawsuit filed by shareholders accusing the company of making false statements about its business practices.

    In August 2018, Wells Fargo agreed to pay $2.09 billion to resolve a Justice Department case involving the misrepresentation of the quality of loans used in residential mortgage-backed securities the bank issued in the period leading up to the financial crisis.

There will be more.

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So, yes. I say that Wells Fargo is a criminal enterprise.

The bank should be put into receivership and broken up, such that all the banks’ branches are turned into not-for-profit “state” banks under the control of respective State legislators and can compete with commercial banks in their respective states.

And, of course, every manager and executive who is guilty of pressuring employees to perform criminal acts should have bonuses and special compensation clawed back and go to jail. The offending employees should be fired and, if guilty of egregious behavior, go to jail, too.

What do you think?

The Corruption Doesn’t End There

If there’s anything that this exposure of Wells Fargo’s criminal activity has shown you, it’s that the corruption doesn’t end. You can’t be too cautious.

In fact, my friend and colleague, the Chief Investment Strategist here at Money Morning, has uncovered even more sinister activity that could affect millions of U.S. investors.

And he’s predicted things like this before – in 2000, he told everyone that tech stocks were about to crash and take the entire economy down with them when they did.

And in 2007, he warned my readers that a handful of subprime mortgage companies were about to fail, bring the economy to its knees, and, in doing so, crush stocks.

Now he’s saying that the greatest economic catastrophe of our generation is about to blindside 176 million U.S. investors, and the average stock traded on Wall Street will plunge by at least 50%.

That’s because the activity of corrupt money managers and politicians is finally coming back to bite us – but unlike the executives at Wells Fargo, it’s the little guys that will be swept away in this tsunami.

And it’s all going to come to a head no later than Wednesday, October 31, 2018.

But, with his help, there’s a way to keep your head above water – and you can learn how to quickly amass a potential $1.5 million retirement nest egg to protect yourself.

He’s compiled all his research into a presentation, and you can click here to learn more.

The clock’s ticking.



6 Responses to Is Wells Fargo a Criminal Enterprise?

  1. Patrick Kriser says:

    Busch should have never have bailed the disgusting Crooks out.May they rot in Hell for what they did in their housing scam.They should be taken over by an honest banking company.And their upper managment should be locked up and their assets should be taken in retrabution for their criminal activites.

  2. Edward Mack says:

    Yet, “Uncle Warren” (Buffett) continues to hold a large stake in the company, though I believe he has sold a bit lately. Does he still think it’s a great investment in spite of the criminal and unethical behavior? Or is it just business? Does his silence on these scandals, fines and criminal behavior speak to his ethics? Just like to know his (Buffett’s) thoughts on this criminality and Mr. Gilani’s on Buffett’s silence.

  3. Mark Handschy says:

    Great idea !!

    True Capitalism requires real competition and a free banking system. We have neither. What we have is an economy dominated by monopolies, large banks, and a pure socialist central bank.

    When Socialist say “Capitalism” is failing, they have no idea what they are talking about (Fake News). We are closer to Central planning socialism than we are to real Capitalism. The truth is….it is Socialism that is failing. This includes banking, monopolies, healthcare, education. It’s all Socialism and it is failing.

    I recommend every Socialist read just one book, any book, authored by Von Mises.

    Not only Wells Fargo, but all of the 15 largest banks should be broken up. I would not advocate eliminating the FED (yet), but I think the FED power to set interest rates should be eliminated. Interest rates should be set only by the market. The FED should only have power to provide liquidity as needed, and only for “good” paper, as was the original intent of the FED banking law. Bailing out “bad” paper (CDS, MBS, Argentina, Greece, etc.) should not be allowed.

    The people who perform and allow the violation of bank customers trust should be prosecuted, fined, and put in jail.


    • Kay Sato says:

      I agree that all of the largest banks should be broken up like they did to Ma Bell back in the day.
      I also agree that the FED should not have any governing power in private business matters.
      When a private company fails, I can’t recall a time the FED came in to bail them out.

  4. Robert N says:

    In the mid 80’s I was doing workouts in the savings and loan debacle. At that ttime I learned what stupid fools most bankers were. I vowed I would NEVER do business with a large bank again. I stick to locally owned andoperated banks ans credit unions and haven’t been disappointed.
    ALL the large banks should be broken up. Wells is just the tip of the iceberg. Of course, the soon to come debt imploson will probably finish some of them off anyway. Just saying…

  5. thabo john mokoena says:

    dear sir iam investor i have account with wellsfargo bank there is know statements i receive please respond

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