If a private citizen applied for and obtained a loan at Wells Fargo using collateral consisting of dummy assets and fake employment, he or she likely would be charged with violating 18 U.S. Code § 1344 – Bank fraud. The elements of the offense are:
Whoever knowingly executes, or attempts to execute a scheme or artifice—
to defraud a financial institution; or
to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;
shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
So what’s up with John Stumpf, chairman and chief executive of Wells Fargo, and senior executive Carrie TolstTolstedt? What is their complicity, if any, in the artificial scheme employed by the bank where phony or fake accounts (2 million of them) were generated to create the illusion that sales expectations had been obtained? It appears to be a scheme to make money, for somebody, in the long run. Under the above statute, it seems clear that the conduct constituted “false or fraudulent” pretenses. The question is, who is to blame? Why hasn’t the Justice Department moved to indict some of the bank employees involved in this fraudulent activity? More particularly, is there a basis to indict these executives?
New York Magazine wrote about “Wells Fargo’s Massive Fraud Scheme” and concluded that “This was criminal activity on a massive scale, and it is going to have lingering effects on innocent people’s abilities to live their lives.” Since most of the accounts opened by the bank without the customer’s consent or knowledge, many of the accounts went bad thereby harming the credit scores of the unwitting customers. The writer of the article was dismayed that the feds were only pursuing civil fines and wrote the following.
“It’s worth asking: Will anyone go to jail for this? The fine, after all, makes for a good headline but is actually something of a pittance: $185 million is just 3.3 percent of the$5.6 billion in the second quarter of this year. And whatever monetary penalties were assessed, there’s a strong case to be made, here as anywhere else, that individuals who engage in fraud should, well, be prosecuted for committing fraud. That’s sort of the point of the legal system.”
OUR FREE OPINION
As we have said before, some people are too big to jail – Don’t hold your breath if you think the top executives at this bank will ever go to jail over this. Meanwhile, don’t miss any payments on your honest loans and keep paying that interest.
UPDATE: October 12, 2016– New York– Wells Fargo’s embattled chief executive, John G. Stumpf, is stepping down immediately, the company announced on Wednesday. The bank has been under fire for a long-running scandal in which employees set up unauthorized accounts to meet sales quotas. Mr. Stumpf and another top executive recently gave up millions of dollars in stock grants the New York Times reports.