When there's a couple of rogue employees I can understand. When there are millions of fraudulent accounts it starts to look like a policy or at least criminal neglicence.

And there are also the companies that are convinced of fraud like Deutsche Bank, but it's the company that pays a huge fine when the executives who were overseeing all this go unscathed.

I have worked in a bank and I know a lot of people there have no clue what's going on, but the fact that it's true does not mean it's a valid excuse. If I kill a pedestrian with my car I can not claim it's not my fault because I had my eyes closed.

I think it somewhat boils down to intention. In the case of Wells Fargo, opening fraudulent accounts couldn't have accrued any benefit for the bank. It seems more likely that it would have increased overall cost for the company. Yes, the fraud is attributable to stressing too much on reaching an upselling goal, but it's hard to imagine it's a thing that CEO would have wanted. Should we start punishing people for managerial oversight?

> opening fraudulent accounts couldn't have accrued any benefit for the bank

Actually, in the hearing Senator Warren tried to connect the fraudulent accounts to the stock price, which would have been a direct benefit for the bank:

> You squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket. And when it all blew up, you kept your job, you kept your multimillion-dollar bonuses and you went on television to blame thousands of $12-an-hour employees.

http://www.nytimes.com/2016/09/23/business/wells-fargo-tests...

Senator Warren is really good at generating sound bites for people who have no idea about how companies work but are abstractly mad at them. The idea that WF would engage in systematic fraud to goose revenue by about $2.4 million is absurd (or add a bunch of accounts generating only that much in revenue--as if Wall Street analysts won't compute revenue per account).

Wells Fargo was touting its new account metrics to investors in addition to the typical revenue numbers. The idea being that if Wells Fargo is gaining that many new customers and new accounts, it would lead to a lot more revenue in the future.

Wells Fargo pushed its employees so hard to open accounts because there was a benefit to doing so.

Revenue growth isn't the only important metric here.

They created two million new accounts, letting them go to the market and tout demand for their banking services.

Having more accounts isn't automatically a good sign for the stock market. It's too easy for a bank to get accounts, you just offer people a sign-up bonus. The number of clients alone will usually not inflate the stock price.

That was my first thought, even before I heard what Warren had to say. IIRC, Lending Tree was doing something similar. People associated with the company were opening accounts with which to borrow or lend money in order to juice the books and report increased earnings.

http://www.bloomberg.com/news/features/2016-08-18/how-lendin...

My understanding is that the multiple accounts were an end run around the per-account limits on various fees.

You are talking about 5,000 current employees being fired and many employees who were fired for reporting it. If he didn't know, then he must not know other things about Wells Fargo that are equally important.

> You are talking about 5,000 current employees being fired and many employees who were fired for reporting it. If he didn't know, then he must not know other things about Wells Fargo that are equally important.

I'm sure that's the case, and I'm sure it's also the case for most CEOs of massive companies.

Wells Fargo has more than 250,000 employees and more than 6000 branches -- more branches than any other US bank. There is nobody who knows everything that is going on. It's just not possible.

The number of employees fired represents a tiny fraction of the total number of employees -- about 2% or less.

Then how does this spread around to all the branches if (way) upper management doesn't know? Does Suzy in Fl really spend her time chatting up Jackie in CA to get the scoop on all the D/L ways to cheat? They have a little IRC channel for duping WF management?

Because some fraction of people are cheaters. Just think of how many people you know who cheated in school. I'd say the number is 10% or higher. Some of those people became CEOs who continued to cheat, but many became low-level bank employees who continued to cheat.

And if you're being measured on how many accounts you create, and the system doesn't have checks to keep people from opening accounts without consent, it's not exactly hard for all the cheaters to figure out what to do. Again, think back to all the ways people cheated in school. You think they had to coordinate to figure out how to cheat?

The management in one branch likely socializes with the management in near-by branches. It spreads through drinks and "Yeah, it's dumb; we just do <sketchy behaviour> so we can get back to work".

Have you ever had a job? Have you ever had management insist upon some stupid metric or some deadline that just could not be met and they refused to hear about it?

People had to open new accounts or lose their jobs. Some people opened fake accounts to accomplish this. When they were found out, they were fired. Sounds like a horrible place to work, but the firings were proof that management didn't want this to happen, not some bizarro proof that this is what they wanted all along.

You don't need coordination to figure out how to game a system.

This is not quite right. They were pressured by managers to open fake accounts, fired for not making quotas if not, fired if they reported the practice, and then all fired once the government finds out and it blows up. Of course the senior management plays dumb and keeps their jobs.

They were not "all fired, once the government found out."

Wells Fargo confirmed to CNNMoney that it had fired 5,300 employees over the last few years related to the shady behavior. Employees went so far as to create phony PIN numbers and fake email addresses to enroll customers in online banking services, the CFPB said.

http://money.cnn.com/2016/09/08/investing/wells-fargo-create...

Making fake accounts is a pretty obvious solution to increasing cross-selling numbers. I'm sure almost all of the branch employees thought about it, but only some actually did it.

You get what you measure. You measure account creation, you'll get account creation. You measure legitimate account creation, and it's a different ballgame.

It's about 5% of US employees, concentrated in one part of the organization.

Closer to 2%.

Wells Fargo global headcount is about 250k. Less than half is in the US.

> If he didn't know, then he must not know other things about Wells Fargo that are equally important.

Yes, but establishing the former (which is a crime) as opposed to the latter (which is an internal business matter for Wells Fargo) is the tricky part.

The CEO gets credit and a lot of money when things go right so he should take blame when things go wrong.

Personally I think they could find out about a lot of wrongdoing if they wanted to.

The question wasn't whether he should take blame, but whether he should be criminally charged. Sounds a bit over the top - I'd rather see WF fined, and then the CEO sued by the shareholders, and forced to pay damages if proven he knew or should have known.

That's an okay opinion, but I'd like to see CEOs criminally charged and go to jail if it's proven that they knew or should have known what was going on.

He is the CEO. He should have known 5000 employees were engaging in fraudulent operations.

Wells Fargo has 265.000 employees. A CEO certainly has to make sure that there's internal oversight according to regulations and industry standards but it's not his job to personally go spying on people (try doing that on 265.000 employees) or implement the Wells Fargo Gestapo.

If it cannot be proven that he knew about it or encouraged this behaviour then he cannot be held legally accountable. It's like demanding the US president should go to prison because some CIA team somewhere does some really shady stuff that he doesn't know about.

Shareholders might still choose to fire that guy, but it's a choice they have, they do not have to if they are satisfied with his performance.

How come that people today lose their ability to reason as soon as bankers are involved? It's similar to the National Socialists reasoning when they blamed the Jews for everything bad "because they had the all money and controlled the world"

Who can then be held responsible when a big company commits criminal acts? Maybe they should arrest all people who opened those fraudulent accounts. All of them. Maybe that will be a deterrent.

But in general a CEO should have a duty to ask questions why a certain division seems to be doing well. Maybe it has to do with earnings targets that are simply unachievable? I see that in my own company. The top guys are setting shorter and shorter deadlines and in my view the quality of engineering suffers. Top management doesn't technically know when people are cutting corners but they could easily have listened to people that the demands are too high.

> Who can then be held responsible when a big company commits criminal acts?

My opinion: Anyone who took part in it either knowing it is illegal or even if the person should have known it is illegal considering his/her position.

Same goes for persons that didn't necessarily know about it but acted negligent or ignored standard procedures that are in place to prevent such a thing.

> But in general a CEO should have a duty to ask questions why a certain division seems to be doing well

Could be negligence, I don't know the specifics here. If it was then he has to be held accountable. But his head might roll in the end regardlessly as people always need a scapegoat, no matter if it's his fault or not. Yet when the government takes action it should not do so just to punish a scapegoat, they should punish because the person broke a law. (if the shareholders fire him even though it's not his fault I couldn't care less, it's their investment and they do not have to act rationally if they want to)

> My opinion: Anyone who took part in it either knowing it is illegal or even if the person should have known it is illegal considering his/her position.

As a general rule, we don't hold people criminally liable for simple negligence.

As a general rule, knowing that something is illegal isn't part of the required mental state, even for acts that require doing something "knowingly"; that usually refers to knowing the specific facts that make the act illegal, not knowing the law under which those acts are illegal.

I did not say "simple" negligence, that is determined by others who know the specifics of this case.

Criminal law makes a distinction between gross negligence (locking the doors to a busy club so people can't get out which then catches on fire and kills everyone), and ordinary negligence (securing a heavy thing in the air with just a knot that falls and kills someone). Even if someone "should have known," that is almost never enough for criminal liability.

Thanks I know, I said that I don't know the specifics and that others (lawyers) will have to decide on that.

Well the head of the Community Banking division should definitely have known. But she's being allowed to retire with her full financial package.

They fired 5000 employees because they were opening fake accounts. Wells found these people on their own and fired them.

In normal people world, this is proof that Wells was taking the problem of fake accounts seriously. (It also sounds like a horrible place to work, but that's a separate issue.)

>The CEO of a small internet company almost certainly has a hand in everything the company does. The CEO of a large corporation has no idea what the line workers are doing.

If that's the case they should be paid like the CEO of a small internet company. You take the money, you take the responsibility.

I agree. It doesn't have to be collusion, in fact, I can easily imagine that there's no large scale coordination, maybe just coordination in small 5-10 person teams. For any incentive scheme, there's going to be a subset of people trying to game it. Given that potentially tens of thousands of employees were presented with the same incentive scheme (the performance system), it makes sense that many people/small groups could independently create similar strategies.

I think it's made more concrete by thinking of how many times you've thought of an app, business, screenplay, etc. and realized later that a dozen others have had the same idea. I bet a dozen people in this thread independently sketched out an app like Uber/Homejoy/"AirBnb-for-X" at some point just based off having the common annoyance of taxi-finding or hiring help.

In standup comedy, this happens a lot because we're all living in 2016 so any joke about the election, Bradjelina, Game of Thrones or any other sufficiently public/widely-discussed topic will have dozens of people trying to make a joke off of it. I'd guess that the set of actions you can take in a 'corporate game' is more finite and structured, so it makes sense that thousands among tens/hundreds of thousands adopt the same strategy.

Logical answer right here. No conspiracy theories, for once.

It's not credible that C-level management were unaware. 5000+ employees doing the same thing, repeatedly, means collusion and coordination up the management hierarchy was taking place. Either internal anti-fraud controls failed, or this activity was actively ignored at management direction. At the very least, the C-level manager at the top of the organization that engaged in this fraud was responsible for a system failure and should be dismissed for cause, without their bonus or severance. Having a lawyer say "Huh, I guess they didn't know" is exactly the cover they need for feigned ignorance.

It means nothing of the sort. People socialize with coworkers all the time, and workarounds for dumb metrics is exactly the sort of thing that get gossipped about.

And "figure out how to make fake accounts" is pretty easy. This absolutely doesn't need coordination at all.

Once worked somewhere that management measured you by number of checkins. Engineers didn't need to talk with each other at all to get those numbers going way up. And they did, you betcha. Ask a stupid question, get a stupid answer.