Wells Fargo, fighting an uphill battle to rehabilitate its reputation, got an assist from the Federal Reserve in early June.
Wells Fargo was founded in 1852 in response to the need for rapid delivery of mail, supplies, and gold to Forty-Niners heading to the California Gold Rush. Over time, the company consolidated its financial services in the western United States and eventually split off its express delivery services. Through continued growth and acquisition, the bank weathered the 2008 recession and rolled out new services as it expanded.
A formerly reputable bank takes a big fall
In early 2013, an investigation by the Los Angeles Times revealed Wells Fargo employees in Southern California were being pressured to meet "cross-selling" goals throughout their branches. Cross-selling is the practice of promoting additional bank products to customers already in the ecosystem. Clients with checking accounts might be encouraged to move their mortgage to Wells Fargo, obtain a credit card, or use another financial service.
Under pressure and for incentive payments, Wells Fargo employees across the country engaged in fraudulent activity, including applying for pre-approved Wells Fargo credit cards for customers who did not ask for them, and using their own contact information for the applications. Bank employees manipulated PIN numbers to create service accounts and moved money into accounts that customers knew nothing about.
Along the way, Wells Fargo garnered millions in fees and interest while falsifying bank records, using client information without authorization and damaging customer credit ratings.
Wells Fargo is estimated to have created 3.5 million fraudulent customer accounts, along with committing mortgage and auto loan violations. Following civil and criminal investigations in 2020, Wells Fargo entered into a deferred prosecution agreement that detailed the ethics-free conduct of the company.
While not classified as tax crimes or tax fraud, the actions of Wells Fargo led the Federal Reserve to place a $2 trillion asset cap on the institution in 2018. The cap effectively blocked future growth beyond where it was in 2018. Despite ongoing changes and rehabilitative gestures, the cap has remained in place.
A fresh start … sort of
In early June, the Federal Reserve voted to lift the asset cap imposed on Wells Fargo, freeing the bank to resume growth and expansion of services.
But the fallout continues to play out for bank executives found to have precipitated the misconduct. In January, the Office of the Controller of Currency leveled a $10 million fine on former Wells Fargo Community Bank Group Risk Officer, Claudia Russ Anderson. She was also barred for life from working in the industry. Two other former executives, David Julian and Paul McLinko, were fined $7 million and $1.5 million, respectively. Following appeal and negotiation, Julian and McLinko resolved their cases with fines of $100,000 and $50,000, respectively, along with a promise to follow the rules going forward.
Concerned about being charged with tax evasion?
The debacle around poor choices made by Wells Fargo and the ensuing civil and criminal charges can never fully be reconciled. If you have concerns about poor choices that may have been made by your company or in your personal tax dealings, speak with an experienced criminal tax attorney from our legal team. Call us at 440-250-9709 or reach out to set up a consultation. We serve domestic and international clients from offices in Cleveland and Chicago.
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