Wells Fargo bogus account estimates balloon, hit 3.5 million
SAN FRANCISCO — Wells Fargo opened as many as 3.5 million bogus bank accounts without the permission of its customers, according to a court filing that shows the scandal that has engulfed the embattled bank appears broader than first thought.
The court papers, filed in connection with a class-action lawsuit against Wells Fargo, also shows the bank has examined a wider time period — by several years — than what was included in a settlement that resulted in $185 million in fines against the financial titan.
The new estimate for bogus bank accounts is about 67 percent higher than the original estimate of up to 2.1 million accounts that were opened without the permission of customers.
“It’s important to note that these are estimates from the attorneys for the plaintiffs,” said Ruben Pulido, a spokesman for Wells Fargo.
The 3.5 million figure is based on a “hypothetical scenario” and remains unverified, Pulido stated.
“The number of unauthorized accounts estimated in the filing do not reflect actual unauthorized accounts,” Pulido said. “The number is the plaintiffs’ estimate—and only an estimate.”
The estimate of 3.5 million accounts could be higher than the actual number, the court filing shows.
“This number may well be over-inclusive,” according to the court records.
In addition, the new estimates cover a period from 2002 to 2017. At the time of the settlement last September, the period covered was a five year stretch from 2011 to sometime in 2016.
“There is no question that 2016 was among the toughest in our 165-year history,” Timothy Sloan, chief executive officer of Wells Fargo, told investors during a meeting in San Francisco.
Sloan also acknowledged that the bank lost its way.
“It’s clear that we had an incentive program and a high-pressure sales culture within our community bank that drove behavior that many times was inappropriate and inconsistent with our values,” Sloan told the investors.
San Francisco-based Wells Fargo terminated 5,300 employees due to their connection with the opening of unauthorized checking or credit accounts. John Stumpf, the former Wells Fargo CEO who presided over the high-pressure culture at the bank, resigned. Carrie Tolstedt, who led the community bank at the height of the accounts fiasco, also left the bank.
Eventually, the bank rescinded $69 million in pay for Stumpf and $66.3 million in pay for Tolstedt as punishment for their roles in the scandal, according to the most recent court filings.
“Public information, negotiations, and confirmatory discovery” were the primary sources used to arrive at the new estimate, the court documents stated.
Shares of Wells Fargo tumbled 1.3 percent and closed at $53.02. So far in 2017, Wells shares have plunged 3.8 percent. The S&P Bank Index is down 3 percent over the same period.
“This problem still is definitely lingering over Wells Fargo,” said Ken Thomas, a Miami-based independent banking analyst.
New federal regulators, as well as the new administration of President Donald Trump, may well scrutinize Wells Fargo with fresh eyes, which could extend the process of resolving the scandal and its fallout a longer one, Thomas said.
It’s not over for by a long shot for Wells Fargo,” Thomas said. “They can put out as many advertisements as they want, but this is going to be around for a while.”