At Wells Fargo, complaints about fraudulent accounts since 2005

John Stumpf, CEO of Wells Fargo, speaks during a House Financial Services Committee hearing in Washington, D.C., U.S., on Thursday, Sept. 29, 2016.
John Stumpf, CEO of Wells Fargo, speaks during a House Financial Services Committee hearing in Washington, D.C., U.S., on Thursday, Sept. 29, 2016. Bloomberg

In 2005, the year John Stumpf became president of Wells Fargo, Julie Tishkoff, then an administrative assistant at the bank, wrote to the company’s human resources department about what she had seen: employees opening sham accounts, forging customer signatures and sending out unsolicited credit cards.

She kept complaining for four years, and she was not alone. For years similar or identical complaints from Wells Fargo workers flowed in to the bank’s internal ethics hotline, its human resources department, and individual managers and supervisors.

In at least two cases in 2011, employees described illegal activities they had witnessed in letters they wrote to Stumpf – who became the company’s chief executive in 2007, and its board chairman in 2010. On Wednesday he stepped down amid the burgeoning ethics scandal. The bank’s board elected President and Chief Operating Officer Tim Sloan to replace him

In the last month, Stumpf has testified twice before Congress that he and other senior managers realized only in 2013 that they had a big problem on their hands – two years after the bank had started firing people over the issue.

Now, regulators, lawmakers, current and former employees, and others are asking: How was it that this drumbeat of complaints did not set off loud alarm bells earlier? And why have the brunt of the firings fallen on low-level workers, not on the managers and executives who shaped the company’s aggressive sales culture?

“It appears that there were activities going on that indicate you may have known much earlier” than 2013, Rep. Maxine Waters, D-Calif., said while questioning Stumpf in a House Financial Services Committee hearing last month.

Waters pointed to court filings from 2008 from employees who tried to blow whistles, and to a Wells Fargo sales quality manual that was updated in 2007 – just months after Stumpf became chief executive, and with his executive guidance – to remind employees that they needed to obtain a customer’s consent before opening an account.

Tishkoff was fired in 2009. At least two of her supervisors were aware of her complaints and ignored them, according to a wrongful termination lawsuit she filed against Wells Fargo in 2011. Those supervisors remain with the bank and are now regional presidents, responsible for overseeing thousands of workers at hundreds of branches.

And since Sept. 8, when Wells Fargo said it would pay $185 million in fines for opening as many as 2 million customer accounts and credit cards without authorization, dozens of former employees have stepped forward to tell stories like Tishkoff’s – describing the company’s toxic sales culture and their own thwarted efforts to use the bank’s internal channels to draw attention to the scope of the problem.

“Everybody knew there was fraud going on, and the people trying to flag it were the ones who got in trouble,” said Ricky M. Hansen Jr., a former branch manager in Scottsdale, Arizona, who was fired after contacting both human resources and the ethics hotline about illegal accounts he had seen being opened.

Wells Fargo says that it investigates all complaints of impropriety from its ethics hotline or other channels. But it added that until 2013, it handled each complaint about account fraud individually. It was not until three years ago that the company realized it had a broader problem, according to Mary Eshet, a Wells Fargo spokeswoman.

At that point, Wells Fargo began an internal investigation. By then, though, the issue had caught the attention of prosecutors and regulators. In May 2015, the Los Angeles city attorney filed a sweeping lawsuit against Wells Fargo over its creation of unauthorized accounts.

Last month, the bank settled that case and two related actions brought by federal regulators. Eshet cited the steps the company took in response to the scandal, including its move this month to drop the sales quotas that employees said created pressure to act unethically.

“We have made fundamental changes to help ensure team members are not being pressured to sell products, customers are receiving the right solutions for their financial needs, our customer-focused culture is upheld at all times and that customer satisfaction is high,” Eshet said.

But former employees whose cases are detailed in lawsuits against the bank say that many of the managers at the branch level and above who heard their ethics complaints did nothing and are still there. Between 2011 and this year, Wells Fargo terminated the employment of 5,300 workers for creating as many as 2 million unauthorized bank and credit card accounts; around 10 percent of those worked at the branch manager level or above, according to the bank, but only one – an area president – had a high-level management role.