> This is a gross misrepresentation of what happened. Thousands of WF employees engaged in fraud that harmed Wells Fargo in order to make themselves appear more productive than they actually were and take money from WF. WF explicitly instructed employees not to do this.

I agree that Wells Fargo ULTIMATELY didn't benefit much from this mess. Your linked article explains this situation thusly:

> fraud is sometimes an emergent property of complex institutions, and that there can be widespread misbehavior at a bank without senior management approving it, or knowing about it, or wanting it.

Fair enough, good metrics are difficult to find and the managers of huge organizations are basically playing a billion dollar version of the blind men and the elephant.

However, I think this explanation ignores two critical things:

1) Wells Fargo DID benefit from the wide-scale fraud in the short run, because juicing the metrics boosted the stock price and generally made senior management look good.

2) Many employees claim that they reported the fraud to internal ethics watchdogs, who should have nothing to gain by perpetuating the scam, only to be ignored or retaliated against for doing so.

I think these facts totally discredit the "lazy employees cheating their employer" narrative and set up an "assholes or idiots" situation for senior management.

I agree senior management were "assholes or idiots", and did not do a good enough job preventing employees from stealing. If I owned WF shares I'd be really angry and I'd probably vote against the current board of directors.

But I'm replying to a post alleging that RICO should be used - essentially claiming that WF is the equivalent of a mafia front and that the CEO is basically Tony Soprano. That's what I'm arguing against.

If the claim that "Employees who do not reach their quotas are often required to work hours beyond their typical work schedule without being compensated for that extra work time" is true, then it's not the employees stealing from the employer but the other way round.

I won't comment on the applicability of RICO but we must hold executives personally accountable for the behavior of their organizations. In many cases that might reasonably mean severe financial penalties and being barred from working in an industry rather than jailtime. I'm not calling for their heads but they have to be held accountable when they don't create effective policies and permit or encourage company cultures that allow fraud and abuse to flourish. And effective policies don't just mean jotting them down in a rule book or creating an ethics hotline. You have to create the processes and structure to enforce them and detect violations.

I don't know how the author can draw this conclusion. He seems to say that employees engaging in shady practices is the inevitable conclusion of requiring a certain amount of accounts to be opened, and then blames the employees for doing it instead of those who wrote the policy.

The article quotes:

"Wells Fargo has strict quotas regulating the number of daily "solutions" that its bankers must reach; these "solutions" include the opening of all new banking and credit card accounts. Managers constantly hound, berate, demean and threaten employees to meet these unreachable quotas. Managers often tell employees to do whatever it takes to reach their quotas. Employees who do not reach their quotas are often required to work hours beyond their typical work schedule without being compensated for that extra work time, and/or are threatened with termination.

"The quotas imposed by Wells Fargo on its employees are often not attainable because there simply are not enough customers who enter a branch on a daily basis for employees to meet their quotas through traditional means."

This reads to me like damning culpability. Then he says, "But obviously no one in senior management wanted this." Well of course they don't, now that they've been caught! But it was a pretty good scheme at the time raking in millions of dollars.

The purpose of cross-selling is to make money, and that's why salespeople are incentivized to do it. The total amount of extra fees that were charged due to this is $2.4M (i.e. negligible to WF), or $1.14/fake account, or $450/dishonest employee.

If an underperforming employee earned $450 in pay that they did not deserve, WF lost money on this. As matt levine explains:

If your customers have a checking account, and a savings account, and a credit card and online banking, all in one place, then they'll probably use each of those products more...when they want a...mortgage...or investment advice -- they're more likely to turn to the bank where they keep the rest of their financial life...No one feels extra loyalty because they have a banking product that they don't use or know about.

In website terms, this is roughly equivalent to the head of marketing buying fake traffic so he can tell his boss that he did a good job with SEO and ask for a raise.

> WF lost money on this

This ignores the fact that Wells Fargo is a publicly traded company and has an incentive to make their numbers look good for their shareholders.

... And to be clear, your assertion is that thousands of employees across different branches all independently decided to commit fraud and risk their jobs all for an additional 450 per pay check? That is your alternative explanation?

On the contrary, I think they committed fraud to keep their jobs. The $450 is a break-even number; if not getting fired resulted in the employees getting an extra $450 in pay, then WF lost money.

I could be missing something here but whether or not Wells Fargo was losing money on each account opening in the short term or even overall is orthogonal to the issue. It might call into question the wisdom of how they structure bonuses but that's not relevant to the real victims which are the customers and bond holders.

Levine's later posts paint a very different picture of the scandal. It feels fairly disingenuous to squarely blame the employees, who by all accounts were overworked, underpaid, and explicitly instructed to boost their cross-sell numbers.

https://www.bloomberg.com/view/articles/2016-11-03/banking-v...

Later information makes clear that managers found out about this behavior, at the very least abided, and even fired employees who complained.

The post you cite doesn't disagree with what I said at all. It describes the idea of creating fake accounts as a bottoms-up idea spread by cultural diffusion:

Even after carefully following the senior managers in charge of Wells Fargo's bad sales practices, the story still feels like one of cultural diffusion, of anonymous ancient peoples moving across the land and leaving archaeological traces of their passage, like stone tools and animal bones and unwanted debit cards.

It points out that there was probably no conspiracy, no explicit instructions, and that the whole thing was unprofitable:

It seems unlikely that he ever told anyone to open any fake accounts; certainly there's no evidence that he did. It doesn't even seem like he had much reason to want the fake accounts, which after all were not profitable.

What is the "different picture" you think this article paints?

I think that we're talking about different levels of management, and their incentives.

At the C-level there aren't great incentives for the accounts. There's an argument to be made that metrics can boost stock price, but whatever. At the branch management level though, there are definitely incentives to not shutting down the practices, after managers found out about them. Even if there aren't explicit instructions, if managers don't disallow the practice after they discover it, that indicates WF involvement beyond the individuals who actually opened the accounts. Furthermore, firing individuals who complain about the fake account practice is a clear example of corporate culpability in this scandal.

Sure, this might not meet conspiracy standards. But it's hard to unilaterally paint the bank as a victim, when there's so many organs to the bank.

I think you're right; I was referring to upper management (as was fludlight in the original post I responded to), you are discussing branch managers. I agree that branch managers were involved.

I agree with you that if the firings happen as alleged, that's a problem. But note Matt Levine's skepticism, which I share:

But I wonder how many of the 5,300 people fired by Wells Fargo for creating fake accounts now claim that they were actually fired in retaliation for refusing to create fake accounts?...Everyone I've seen or heard interviewed about the scandal describes seeing people create fake accounts, but not doing it themselves.

By describing the bank as a victim, I meant the shareholders.

So why has only WF seen this? Could it be that their internal controls on account signup were deliberately lax? And why is there always someone on HN willing to stand up for the poor helpless neglected multibillion dollar business?

I'm reminded of "will no one rid me of this troublesome priest" ( https://en.wikipedia.org/wiki/Thomas_Becket ). Not specifically asking that someone be murdered, but implying from a position of power that it's something you really want to happen.

Similarly setting up an incentive system with targets that are unmeetable without unethical practices then looking the other way when those practices happen implies a certain amount of complicity. It's just really hard to prove, which is the intention, and why some offences are "strict liability".

Not to mention that the use of punishment for not meeting unmeetable targets is not the same as not giving out bonuses for not meeting them.

> So why has only WF seen this?

Why do you think only WF as seen this? They simply are the tall poppy that went a bit too far.

The high metrics that purposefully cause employee turnover due to not being long-term sustainable are more or less industry standard. These policies always lead to at least some low-level fraud trying to game the numbers by the retail level folks, but usually it's a dull roar and more an annoyance that easily gets eclipsed by the additional sales benefit.

And not even the banking industry. The retail service industry. It's simply how the game is played these days, Wells Fargo wasn't much interesting in this respect, they were just ham fisted and clumsier than most.

If you ask any retail bank employee working at Wells Fargo vs. any of the other retail majors wasn't a much different experience. Working as a retail banker is also much more like working as a manager of Instant Oil Change selling upsells than an investment banker deciding where to invest. I think you'll find most folks prefer the Wells Fargo job over other majors; at least my friends who were bank tellers/retail bank managers did.

I have a relative who was fired from Wells Fargo and who i know for a fact was involved in this issue, and I can assure you, when Wells bought out the smaller bank that this person was already working for as a branch manager, it was a completely different experience. People who had decades of experience as successful branch employees had their lives turned upside down once they became employees of Wells. it was an entirely unique situation.

I agree that WF screwed up really bad. If I were a shareholder I'd be mad.

As a person who isn't a shareholder, I look at this the same way I look at other companies I don't own (e.g. Knight Capital, Yahoo) being mismanaged: ¯\_(ツ)_/¯

Not to mention that the use of punishment for not meeting unmeetable targets is not the same as not giving out bonuses for not meeting them.

Either way, regardless of whether they got caught or not, WF lost money on this. It's a screwup that harms them, not a criminal conspiracy as the parent poster alleged.

While these employees were certainly committing fraud and knew better I think it's an enormous stretch to call Wells Fargo a victim. At this point in human cultural development we have a solid grasp on the power and danger of perverse incentives. Particularly in safety and finance.

There's no excuse for a financial institution to not have policies and processes to prohibit, prevent and detect misaligned incentives put in place by sales organizations/departments/teams within the institution. No one wants to mess with their sales organizations without being legally compelled to since they're the ones generating income but financial institutions have a special responsibility and obligation to society to not fuck things like this up.

It's hard, in this situation, to say what "Wells Fargo" really wanted since Wells Fargo is just a corporation without any brain of it's own. I'd be perfectly willing to believe that Upper Management would have been horrified at the situation if they'd known. But at the same time this seems to have been pretty widespread within some level of lower management.

Which one is really Wells Fargo? That's not a question with a real answer unless you specify why you're asking. From the perspective of an investor it would be wise to treat upper management as the real Wells Fargo. But for a customer the fraudy bits are the ones you're interacting with.