Lawsuit digs dirt on Wells Fargo actions

WELLS Fargo managers have been accused of fuelling the creation of bogus accounts in what may be the first lawsuit by fired or demoted employees since the bank was fined by regulators early in September.

The lawsuit offers details of how low-level bankers were allegedly pushed to create at least 10 new accounts a day in a sales initiative that has blown up into a scandal and prompted US legislators to call for CEO John Stumpf’s resignation. Bankers were “coached” to secretly open fee-generating accounts and often resorted to using false customer contact information like NoName@WellsFargo.com on accounts so they could not be traced back, according to the complaint.

The bank, according to the Los Angeles suit, rewarded employees with promotions for using tactics including “sandbagging” — opening fake accounts the day after a customer instructed the bank not to; “pinning” — assigning personal identification numbers without customer authorisation; and “bundling” — lying to customers about limited availability of certain products in packages.

Wells Fargo fired 5,300 employees who it blamed for opening accounts without client approval, but the bankers who sued on Thursday said the dishonest practices were orchestrated by Stumpf.

“Wells Fargo knew that their unreasonable quotas were driving these unethical behaviours that were used fraudulently to increase their stock price and benefit the CEO at the expense of the low-level employees,” the bankers alleged in state court. “Although this policy was known to top executives of defendants, plaintiffs, as bankers, were blamed for harm to clients and retaliated against.”

Authorities, including the US Consumer Financial Protection Bureau, fined Wells Fargo $185m on September 8 for potentially opening about 2-million deposit and credit card accounts without authorisation.

Wells Fargo hired a law firm to advise the board on potential pay clawbacks as the bank grappled with fallout from the scandal, the Wall Street Journal reported on Friday. Robert Mundheim, a lawyer with Shearman & Sterling in New York, was retained to help the board determine whether to claw back compensation from Stumpf, chief operating officer Tim Sloan and Carrie Tolstedt, the former head of community banking, the newspaper said, citing a person familiar with the matter.

Oscar Suris, a spokesman at Wells Fargo, declined to comment on the claims made in the suit or on the reported hiring of Shearman & Sterling.

The bank has also been sued by customers and investors.

Employees were instructed by management to lie to customers by telling them that each cheque account automatically came with a savings, credit card or other type of account, according to the complaint.

Sales at each bank and for each employee were reported to district managers four times a day and discussed by them, according to the complaint. Employees who failed to meet daily goals were often reprimanded. The plaintiffs said some workers were told by managers to “do whatever it takes” to meet quotas.

The bankers who sued, Alexander Polonsky and Brian Zaghi, are seeking class-action status on behalf of other Wells employees in California who were fired or demoted during the past 10 years and are asking for at least $2.6bn in damages.

The suit includes claims of wrongful termination, retaliation, unlawful business practices and failure to pay wages.

Bank managers often handed employees blank account forms with an unknown signature at the bottom and the bankers were expected to fill in the forms, adding as many bank accounts as they needed to meet their quotas, Jonathan Delshad, the plaintiffs’ attorney, said in the complaint.

“It could have been a customer’s signature, it could have been their manager’s — they had no way of knowing,” Delshad said in an interview.

Sales at each bank and for each employee were reported to managers four times a day