The dirt at Wells Fargo & Co. (NYSE: WFC) knows no depths. Last week, yet another example of systemic fraud was unearthed.
From 2017 through early 2018, employees at the Systemically Important Financial Institution (SIFI) fraudulently altered social security numbers, addresses, and dates of birth on thousands of corporate customer documents.
Here's what the bank was dodging, who should be fired (and jailed), and where to put your money when major institutions fail you...
Why This Time Is Different
The last couple of front-page news stories about fraud at Wells Fargo focused on managers encouraging employees to open 3.5 million fake checking and credit accounts and employees improperly charging mortgage and auto loan customers hidden and egregious fees.
This time, however, it's a little different.
This time, Wells Fargo employees altered and added fake social security numbers, addresses, and dates of birth on possibly tens of thousands of small corporate customers' account information files in the bank's "wholesale" unit.
As part of 2015 anti-money laundering controls imposed on Wells Fargo by regulators for the bank's compliance failures, Wells had to update and complete customer profiles in the bank's wholesale unit, which covers more than 100,000 small firm accounts with assets of between $5 million and $20 million.
With the June 30, 2018, deadline approaching to meet consent orders related to the bank's compliance problems, and no way to get all the information it hasn't rounded up since 2015 in on time, it looks like employees took it upon themselves (or were told) to fill in verification requirements in customer account documentation files.
This time, the criminal activity wasn't about ripping off customers; it was about cheating regulators.
And when it comes to regulators, a Wells Fargo spokesman said the bank doesn't comment on regulatory matters. He said in a statement: "This matter involves documents used for internal purposes. No customers were negatively impacted, no data left the company, and no products or services were sold as a result."
In other words, "So, what's the big deal?"
How much the bank's going to have to pay for this is anybody's guess.
But because regulatory infractions don't create front-page news like ripping off millions of customers does, the fines won't be close to the $1 billion dollars Wells just paid for its mortgage and auto loan criminal activity.
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If you want to guess what Wells might have to pay, you can find the bank's rap sheet that lists Wells' more egregious criminal activity and fines paid here, and it will both enlighten and enrage you.
Crime Doesn't Pay
The problem now is that no one has been criminally charged over any of Wells Fargo's fraud and theft. There haven't even been mass firings of managers and employees guilty of fraud and theft.
The entire board is still employed. All senior executives haven't been drawn and quartered - even if they were connected to, or even peripherally made aware of, any of the wafting stink emanating out of the garbage pile that is the Wells Fargo culture.
Perhaps that's a bit too harsh. After all, the same Wells Fargo spokesman added, "Over the past several months we've built more robust internal processes that reinforce our values, and if we find any situations where behavior violates those values, we take swift action to correct."
But the only thing that's happened is two executives had $75 million in compensation "clawed back" while everyone else walked away - either with what they pocketed or are still at the bank getting handsomely compensated for whatever they got away with.
Heads have to roll, starting with everyone on the board and all senior management in any way connected to any of the bank's bad behavior.
People must be prosecuted and go to jail, and their compensation must be clawed back.
Maybe then, after the rot has been cleared out of one of America's giant, too-big-to-jail SIFI banks, the company's stock will be a good investment.
And other banks will have been served unequivocal notice: Crime doesn't pay.
If You Don't Act Now, You May Be Stuck in This Mess for a Long, Long Time
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About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.