The California Dept. of Justice has launched an investigation on Wells Fargo & Co. over the alleged engagement in criminal identity theft. The bank was charged with the productions of unsanctioned customer accounts, as stated in the search warrant delivered to the bank’s headquarters in San Francisco. Millions of these alleged accounts were made over the last 5 years, with customers’ kept in the dark.
The search warrant, along with other related documents were served on Oct 5th this year. The Times used a public records request to confirm that Kamala Harris, the California Attorney General, in her last weeks of running her U.S. Senate campaign, has connected with the increasing number of civil servants and agencies who are investigating Wells Fargo. These claims go back as far as May 2011.
Harris’s office is not only requesting Wells Fargo hand over an assortment of information, including, but not limited to the names of the California customers’ with unauthorized accounts unknowingly opened on their behalf, but also information on accounts opened in other states. She is demanding the bank to hand over the identities of all bank workers who opened each account, all information on their managers, and all forms of communication, including emails, about the alleged accounts.
A representative for Harris’ office, Kristin Ford, said she was unable to comment while the investigation was ongoing. Mark Folk, a spokesman for Wells Fargo assured us the bank is currently “cooperating in providing the requested information” but could not speak further on the subject.
Documents filed in conjunction with the October search warrant claim they have reason to trust, the bank, Wells Fargo, violated at least two sections of California’s penal code. One section includes the outlawing of select forms of impersonation, and the other outlaws the unwarranted use of a customers’ personal file. Both crimes can carry felony charges that can be punishable by over a year in prison.
It is still unclear if Harris’ office is filing charges focusing on the individual employees opposed to, higher level bank managers or Wells Fargo as a whole. In any capacity, these charges are extremely damaging and the open investigation can still produce charges beyond the allegations of identity theft outlined in the warrant.
In the month preceding the search warrant, the Los Angeles city attorney’s offices, along with many federal bank regulators announced the $185-million settlement Wells Fargo agreed to, regarding the fabrication of the unauthorized accounts. Other lawmakers have questioned if the bank has violated other laws, including securities, fraud or labor.
Shortly after the civil settlement was made public, chief executive officer (CEO) John Stumpf was summoned to testify before Congress. Observers of the hearing have widely criticized his performance. Many of whom say he appeared ill-prepared to deal with tough questioning by lawmakers such as Massachusetts Democratic Senator Elizabeth Warren, who called for him to resign and also be investigated for his involvement in the case. She was quoted saying he was “gutless” in his previous leadership of the bank.
Last week, Stumpf retired early and Tim Sloan, the Chief Operating Officer, quickly took his position.
Carrie Tolstedt, a retired bank executive, who was central to the the bank division at the crux of the alleged scandal, has been questioned to the extent of her involvement over the years. She has since retired this last summer before the settlement, prompted by the article written in 2013 by the Los Angeles Times that brought forth the banks practices, had brought these issues to the public eye.
Surprisingly, identity theft has not been the main focus in the investigation, and it is important that it is the bases of Harris’ investigation, said Paul Stephens, the policy director of the San Diego nonprofit Privacy Rights Clearinghouse.”One wouldn’t typically think of a financial institution opening an account in the name of a customer as being an act of identity theft,” said Stephens. “It’s a creative way of looking at these activities and finding them unlawful under a statute that arguably could be prosecuted in state court.”
An affidavit filed by Special Agent Supervisor James Hirt, with the California Department of Justice reveals that interviews with alleged victims of the fraudulent accounts have already started.
One of the victims, identified only as “Ms. B,” told the investigator that she had declined a request by a Wells Fargo bank teller, in late 2011 or early 2012, to open new accounts. However, in late 2013 or early 2014, she started to receive notices that she and her husband “allegedly owed on three life insurance policies held by the bank,” the affidavit says. Wells Fargo also told her that her accounts had to be closed and reopened because of unexplained “problems”. These constant changes to her account statuses caused her to incur fees due to bounced checks.
Bank regulators also reported that bank workers had forged customers’ signatures, created PINs without the customers’ knowledge and transferred money from legitimate customer accounts into the new unauthorized accounts to ensure they looked real.
Despite the already far-ranging scope the investigation holds on Wells Fargo, it looks as though the woes are only starting for the bank.
California State Treasurer John Chiang stated last month that his office would end their business relationships with Wells Fargo. This move has spiraled into other government officials in Seattle, San Francisco, and all of Ohio and Illinois cutting relationships with Wells Fargo.
After the investigations and subsequent loss of business. Standard & Poor’s announced they had downgraded Wells Fargo’s credit rating from a “stable” status to a “negative” status. In a document released by S & P’s the change is explained, the agency said it is concerned about the “ongoing legal and regulatory investigations.” They are also concerned with the long-ranging effects of the bank’s newly damaged reputation on its future endeavors.
Wells Fargo has also shown a 9% decrease in its 3rd quarter profits, compared to the previous year. The amount of new accounts opened this September fell by 25%, also in comparison to 2015.
Wells Fargo has also experienced a 9% drop in their stocks since the 185-million settlement, bringing their price down to $45.26 per stock.