It is hard to write yet another posting about Wells Fargo’s misconduct. Wells Fargo’s troubles continue unabated. I am not exaggerating — I promise. Every few months, we hear about another problem, another enforcement action, another uncovering of misconduct. I do not intend to attempt to even recount all of Wells Fargo’s horrible history. We all know it, and like a rotten fish, we all can smell it.
Before summarizing Wells Fargo’s latest problem, let me suggest the so-called “root cause.” When Wells Fargo’s troubles resulting from its sales incentives fiasco and fraudulent activities surrounding its customers first became known, many inside Wells Fargo sought to protect themselves, including its CEO, and various board members, and then sought to deflect blame to others.
This attitude was pervasive and it was not until the full scope of the problems became evident that Wells Fargo’s senior management and board troubles resulted in the firing of the CEO, termination of senior management and replacement of board members. For some reason, I would guess, Wells Fargo made no real attempt to alter its fundamental operating culture. A surgical strike was implemented when a wholesale makeover from top to bottom was warranted. It appears that whatever attempt was made to remediate Wells Fargo’s problems, the effort was lacking and the commitment to real change never actually occurred. Changing faces in various positions did not result in any change in corporate attitude, culture or performance.
In this context, let’s turn to the latest fiasco — and its a doozy.
The US Department of Justice and other agencies are investigating Wells Fargo for fraud in its diversity hiring program. A prior class action lawsuit filed in California claimed that some bank managers conducted sham interviews of potential candidates to meet diversity interviewing quotas.
Just what Wells Fargo needed to demonstrate its complete lack of commitment to diversity initiatives. The class action lawsuit claims that bank managers set up sham interviews of candidates who qualified as “diverse” candidates to comply with Wells Fargo’s requirement that at least half of all candidates interviewed would have to come from underrepresented populations.
In response, federal law enforcement began an investigation. Rep. Maxine Waters, Chair of the House Financial Services Committee, requested that the Federal Reserve and the Consumer Financial Protection Bureau launch their own investigations.
The Manhattan U.S. Attorney’s Office initiated a criminal investigation. The Office’s Civil Rights Unit is conducting the investigation.
Wells Fargo first announced its diversity initiative and interview program in 2020. in practice, women and minorities were interviewed for positions that they had no chance of winning. Wells Fargo’s efforts were designed to promote claims that it considered diverse candidates for management positions but were intended to avoid increasing the actual number of diverse employees. The sham practice was designed to meet regulatory expectations in case there was an audit.
Former bank employees have been reported to indicate that supervisors in the wealth-management division instructed them to interview Black and female candidates for positions that had aleady been filled with another candidate.
Rather than acknowledge or embrace the potential problem, Wells Fargo has sought to diminish the allegations by claiming that the practice was more “anecdotal” than “pervasive.”
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