News yesterday that the Wells Fargo board voted to clawback a further $75 million in bonus awards from two former senior executives who it says were largely to blame for driving a culture of fraudulent sales activities. Still, it is clear that long-running fraud at this bank was aided and abetted my many parties within and around Wells Fargo, including the Board of Directors (see the esteemed list of members here) who collected rich compensation while failing in their duty of oversight.
Some 5000 employees lost their jobs and a few executives lost bonuses, but while the company has issued an official apology it has also blocked the efforts of affected customers to sue for the resulting damage inflicted on their credit record, housing and employment opportunities. The bank asserts that the small print of mandatory arbitration clauses signed by customers when they opened accounts at Wells Fargo, also applies to fraudulent accounts opened in their names, without their consent.
This type of bank behavior is outrageous, but common. See my recent discussion of entrapment and misrepresentation being used by Canada’s CIBC, where salesmen dressed in Tim Horton’s uniforms hang out in student centers tricking university kids into signing up for credit cards–by saying they are offering free Tim Horton’s gift cards as a present to help kids get through exams.
It also reminds of a recent CBC Go Public investigation which revealed the fraudulent tactics used by representatives of PC Financial to get customers shopping in Loblaws-owned stores tricked into applying for its MasterCard products. See: “Whatever means necessary”, how these insiders tricked Loblaws shoppers into signing up for credit cards with a special focus on poor and illiterate customers who offered the easiest marks.
At the end of all of this and so much more, one thing is abundantly clear: fines, firings and public apologies to date, have been woefully inadequate to curtail a runaway finance cartel gone wild. Personal prosecutions against actors and directing minds–those responsible for oversight–are our only hope of getting a message of intolerance and reform into this socially destructive sector. See: Plenty More Villains at Wells Fargo:
Finally — and this is a lesson learned over and over after the financial crisis — prosecutors at the Justice Department and the Securities and Exchange Commission need to pursue individual wrongdoers, civilly or criminally, as the situation warrants. Unless and until clawbacks are combined with private litigation and public prosecutions, misconduct and negligence will endure.