The U.S. Securities and Exchange Commission is investigating whether Wells Fargo (WFC) violated whistleblower protections, in the wake of allegations of aggressive and illegal sales tactics, and misled investors over these allegations. The probe comes after Senators Jeff Merkeley (D-Ore), Elizabeth Warren (D-Mass), and Robert Menendez (D-NJ) sent the Commission a letter asking the regulator to examine whether the bank misled investigators over cross-selling claims.
In the letter, the US senators asked the SEC to look into whether Wells Fargo violated Sarbanes-Oxley’s internal control provisions and whistleblower protection laws by firing employees who attempted to report alleged misconduct involving fake accounts. The three senators also asked the Commission to look at whether the bank failed to properly disclose bogus accounts while marketing high figures related to the creation of accounts.
Wells Fargo recently came under fire for setting up some two million bogus accounts. It settled the case, which was brought by California prosecutors and federal regulators—including the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau— for $185M in penalties and $5M in customer restitution. Questions have since arisen over why the bank did not notify investors about these cross-selling allegations until it settled with regulators, even though Ex-CEO John Stumpf admitted that he knew about the problems going as far back as 2013.
Regarding the whistleblower protection violation allegations, a number of former Wells Fargo workers have stepped forward claiming that the bank retaliated against them for trying to report the fake accounts. According to the senators’ letter, documents obtained by the Financial Industry Regulatory Authority reportedly demonstrate that Wells Fargo submitted notice-of-termination documents for over 200 employees related to the cross-selling allegations between ’11 and ’15. The lawmakers noted that media reports imply that the bank also may have submitted incomplete or inaccurate forms with the intention of getting back at whistleblowers.
In the US, whistleblower protection laws prevent employers from getting back at employees for reporting suspicions or actual acts of wrongdoing. A employee who is punished in any way for whistleblowing may have grounds for compensation.
This week, Wells Fargo cautioned that it could be facing $1.7M in legal costs over litigation losses. The US Department of Justice and state attorneys general are also investigating the bank.
Meantime, Wells Fargo has just agreed to pay $50M to settle a class action securities case accusing the bank of overcharging thousands of homeowners for home appraisals after the owners defaulted on mortgage loan payments. As part of the proposed settlement, the bank will mail checks to over 250,000 customers throughout the US whose residences the bank serviced between ’05 and ’10.
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Wells Fargo Says the SEC is Also Investigating its Accounts Scandal, LA Times, November 3, 2016
Three Senators Ask SEC to Investigate Wells Fargo, The Wall Street Journal, October 29, 2016