Update 10/14/16: Well, it shouldn’t come as a surprise at this point, but Wells Fargo is facing yet another class action. This time, the bank’s employees are taking issue with the fact that their 401(k)s took a dive after the fake account scandal hit the headlines. Reportedly, Wells Fargo’s stock has since dropped 12% and employees who invested in the company are paying the price. The lawsuit is claiming that Wells Fargo knew its stock was artificially inflated, but still let its employees invest in it through an employee-stock ownership plan and a non-ESOP fund, all in violation of the Employee Retirement Income Security Act.
The case is Allen v Wells Fargo & Company et al Case Number 0:16-cv-03405 in the U.S. District Court for The District of Minnesota.
Unless you’re slightly out of the loop (which is definitely OK), you’ve probably heard about the maelstrom of bad news hitting Wells Fargo right now. First, the $185 million in fines for creating fake accounts on behalf of its customers. Now, a class action lawsuit over the same claims, as well as a case filed by current and former employees who were allegedly penalized for not taking part in the reportedly fraudulent practices.
So, What Does It All Mean?
Meaning of life discussions aside, Wells Fargo is in a heap of trouble.This is what Wells Fargo has been accused of doing since 2011:
- Creating fake emails to sign customers up for online banking
- Making nearly 1.5 million additional bank accounts that accumulated roughly $2.6 million in fees
- Transferring small amounts of money from existing accounts to open fake ones
- Fraudulently applying for close to 565,000 credit/debit cards
And this was done all without consumers’ consent, of course.
No one even noticed until they started accumulating fees on accounts they didn’t authorize and getting mailed debit and credit cards they never ordered. The practice finally made headlines when the Consumer Financial Protection Bureau reviewed Wells Fargo’s sales practices and issued the largest penalty in its history ($100 million – with the Office of the Comptroller of the Currency and the city of Los Angeles contributing the other $85 million).
But, why would the banks’ employees decide to go rouge and start making phony accounts? Apparently, Wells Fargo gave its employees some crazy-high sales standards to meet and failed to properly oversee the inevitable consequences of creating a “do whatever it takes to meet your quota” mentality. The bank fired nearly 5,300 employees who were involved; however, that doesn’t get Wells Fargo off the hook since it knew what was going on and didn’t do anything to stop it.
On top of that, two former Wells Fargo employees are seeking $2.6 billion for current and former bank employees who were punished because they didn’t meet Wells Fargo’s “unrealistic quotas.” The suit is claiming that the bank promoted employees who made their quotas by setting up fake accounts – while those who didn’t take part were demoted or fired.
How Will It All Turn Out?
This one is pretty interesting to speculate about – if you’re into that sort of thing. Wells Fargo already apologized (for whatever it’s worth) and agreed to refund fees that may have been inappropriately charged. The lawsuit filed on behalf of Wells Fargo account holders is seeking an order to prevent the bank from taking the same actions again, as well as disgorgement of the revenues wrongfully retained and a monetary penalty.
It could be argued that since Wells Fargo already gave the money back to restore customers’ accounts, a lawsuit has nothing left to claim. The court may find that Wells Fargo sufficiently relieved its customers thanks to the fines it was already hit with. On the other hand, Wells Fargo could still be forced to pay punitive damages for engaging in fraudulent business practices. That being said, it will still be up to the court to determine where the lawsuit will go from here.
And, as far as the employees’ suit? Well, it’s pretty scummy for a company to reward poor behavior and punish anyone for doing what’s right – but do the workers have legal recourse? Only time will tell.