The recent widespread scandal at Wells Fargo jolted and shocked the corporate world. How could such internal corrupt and outrageously illegal and unethical activities by professionals have occurred? Wells Fargo is "an American multinational financial services company headquartered in San Francisco, California" with offices nationwide and "the world's second-largest bank by market capitalization and the third largest bank in the U.S. by total assets." In September 2016 it was discovered that the company was continuing to create fake customer accounts to show positive financial activity and gains. 5,000 salespeople had created 2 million fake customer accounts to meet high-pressure internal sales goals, including a monthly report called the "Motivator."

The out-of-control sales leadership pressured sales employees to meet unrealistic, outrageous sales targets. Dramatically unrealistic sales goals propelled by continuous pressure from management coerced employees to open accounts for customers who didn't want or need them. "Some Wells Fargo bankers impersonated their customers and used false email addresses like n..e@wellsfargo.com, according to a 2015 lawsuit filed by the city of Los Angeles."

The "abusive sales practices claimed in a lawsuit that Wells Fargo employees probably created 3.5 million bogus accounts" starting in May 2002. Wells Fargo is awaiting final approval to settle that case for $142 million. However, regulators and investigations found that the misconduct was far more "pervasive and persistent" than had been realized. "The bank's culture of misconduct extended well beyond the original revelations." For example, regulators found that the company was (1) "overcharging small businesses for credit card transactions by using a 'deceptive' 63-page contract to confuse them." (2) The company also charged at least 570,000 customers for auto insurance they did not need. (3)The firm admitted that it found 20,000 customers who could have defaulted on their car loans from these bogus actions; (4) The company also had created over 3.5 million fake accounts attributed to customers who had no knowledge of such accounts.

Wells Fargo has had to testify before Congress over these charges, which have amounted to $185 million dollars, and more recently the company has been ordered by regulators to return $3.4 million to brokerage customers who were defrauded. The CEO and management team have been fired and had millions of dollars withheld from their pay.

In the aftermath of the scandal, even though Wells Fargo executives were not imprisoned for the extensive consumer abuses committed by the company, the CFPB (Consumer Financial Protection Bureau) and Office of the Comptroller of the Currency (OCC) imposed a $1 billion fine on Wells Fargo for consumer-related abuses regarding auto loan and mortgage products. The OCC also forced the company to allow regulators the authority to enforce several actions to prevent future abuses, such as and including "imposing business restrictions and making changes to executive officers or members of the bank's board of directors." The new president of the company, Tim Sloan, stated, "What we're trying to do, as we make change in the company and make improvements, is not just fix a problem, but build a better bank, transform the bank for the future."

1. Identify and use relevant concepts from this chapter as well as your own thoughts and analysis to diagnose the scandal at Wells Fargo. How could such a scandal have occurred in the first place? Who and what was at fault?
2. Suggest some solution paths the company might consider, using knowledge from this chapter and your own thoughts/research, to avoid such a scandal from reoccurring.