Nvèr Hasratyan knew within a few hours of joining Wells Fargo in 2013 that he had made a big mistake.
The graduate from the University of Nebraska in Omaha had arrived in the US a few years earlier from Armenia, and was thrilled to start building a career at America’s third-biggest bank by assets. But on day one in a branch in Beverly Hills he was told by a manager to pull out his phone and look for contacts who might open an account.
Not long after that, he found himself roaming the aisles at Petco, the animal-supplies store, trying to persuade dog-grooming specialists to sign up for small-business services. He would try to time his visits to coincide with managers’ lunch breaks. Even so, he got caught and thrown out. Three times.
“If you went back without accounts, it’d be a miserable day,” he says, speaking at a chic hotel a block away from the branch on Wilshire Boulevard where he started out.
He says the job felt like pushing nightclub invitations to strangers. “It wasn’t negotiable, you had to join the party.”
Senior Wells executives now admit that the culture in the retail banking division was badly broken. Staff in branches across the country were straining to hit aggressive sales targets handed down from above: sometimes as many as 15 products a day, every single day. Many of them had to cheat to get there, cajoling friends, family and whomever they could find to sign up for services they neither needed nor wanted.
Last year, the bank paid a record fine, had its chief executive resign, rejigged its board and scrapped the targets that had made it — for a while, at least — the darling of the stock market. A couple of months ago, Wells put out a new estimate of the scale of the deception, admitting that, over a period of eight years to September 2016, employees opened about 3.5m current, savings and credit card accounts that customers had not authorised.
Once accounts were opened they often stayed open, incurring fees. If a customer complained, managers would transfer the remaining balance minus one or two cents. The “pending close” status could last forever, according to Mr Hasratyan.
But former employees who spoke to the FT are unanimous: the scam could have been stopped a lot earlier had top executives listened to the messages coming up from the shop floor. Instead, they say, people who tried to complain tended to get short shrift: they were told to toe the line or lose their job. Calls to human resources and an internal ethics line rarely went anywhere. Worse, many of the people who alerted senior executives found themselves “alienated”, according to Rasheeda Kamar, a branch manager in New Jersey who tried to escalate concerns through the approved channels.
The scandal cost $185m in fines from three US regulators. The bank settled a separate class-action lawsuit, for $142m, with customers whose credit ratings were hurt. But it is hard to put a price on the human toll: the sackings of staff trying to hit targets the bank now accepts were illegitimate (some 5,300 employees were dismissed over the years), and the stress caused to those who tried to tough it out.
Mr Hasratyan, for his part, says he developed a stomach ulcer after a campaign of intimidation that began when he complained to HR about fraudulent accounts.
Officially under investigation for opening fake accounts — a charge he denies — he had to submit to constant monitoring of his movements. He was not allowed to take toilet breaks lasting longer than a few minutes. One district manager offered to settle differences in a private meeting in a stairwell, but Mr Hasratyan refused, sensing that the manager might try to fake some kind of assault.
He drafted a resignation letter a couple of weeks after joining. About 18 months later, having finally found another job to go to, he sent it.
Why not take things further up the chain — perhaps to chief executive John Stumpf?
“I didn’t email him at any point. I knew if I did, I’d be fired.”
It is not supposed to work like this. Staff should be any company’s first line of defence in the fight against fraud and other violations. Through their insights into the circumstances and the personalities involved, the theory goes, whistleblowers can nip wrongdoing in the bud before it becomes something really serious. It is the old principle of “see something, say something”, says Michael Winston, a former executive at mortgage provider Countrywide who tried, without success, to report “rampant” fraud in underwriting in the run-up to the crisis.
Hence the protection for whistleblowers, on paper at least. Under the Sarbanes-Oxley Act of 2002, for example, any kind of retaliation against whistleblowers — including dismissal, demotion, suspension, threats or harassment — was banned. In 2010, the Dodd-Frank Act took those measures one step further for staff on Wall Street, so that banks had to prove with “clear and convincing evidence” that any kind of sanction was unrelated to whistleblowing.
“That’s a high standard of proof,” says Louis Clark, chief executive of the Government Accountability Project (GAP), a whistleblower protection and advocacy group based in Washington.
But speaking up can still be costly, says Mr Clark, citing the patchy record of the Occupational Safety and Health Administration (OSHA), a branch of the Department of Labor tasked with, among other things, reviewing claims of retaliation as part of its Whistleblower Protection Program.
A GAP study found that over a six-year period up to 2016, in one region covering California, Arizona and Nevada, investigators working for OSHA found in favour of the whistleblower about 30 per cent of the time. But OSHA’s management in that region went on to reverse almost all those findings, so that whistleblowers ended up prevailing in just 3 per cent of cases.
“Some of these defendants are very powerful special interests: Wells Fargo, JPMorgan, [aerospace manufacturer] Lockheed Martin,” says Tom Devine, GAP’s legal director.
One ongoing case in that region involves Johnny Burris, a former wealth manager at JPMorgan Chase in Sun City West, Arizona. He says he was sacked in 2012 after refusing to play along with managers’ demands to push in-house products on to customers. He notes that in 2015, JPMorgan paid more than $360m to settle allegations from two government agencies that it failed to make adequate disclosures when its brokers promoted the bank’s own products. In both those actions, the bank admitted the facts set forth by the regulators and agreed to be censured for breaking laws.
After Mr Burris lost an arbitration with Finra, the self-regulatory body for the securities industry, he filed a complaint with OSHA. It then deliberated for about three years before awarding Mr Burris damages of about $400,000 in lost pay and legal costs. He is appealing against the decision, seeking a sum many times higher.
Trish Wexler, a spokesperson for JPMorgan, says that Mr Burris’ “tale has been proven wrong, as his claims were unanimously rejected by a multi-judge [Finra] panel after he had a full and fair opportunity to present them”. As for the link between the 2012 sacking and the 2015 settlements, Ms Wexler says the settlements “were about weak disclosures on written documents, and utterly unrelated to bankers selling products. Burris is misleadingly conflating the two.”
OSHA says it is committed to investigating complaints filed by whistleblowers and does not comment on individual investigations.
Mr Burris says that he had gone all the way to the regional managers of JPMorgan, who offered no assistance. “I was trying to say, ‘Hey, what I see going on here is unethical, potentially illegal, it needs to be addressed,’” he says.
“It was addressed all right — by terminating me.”
For years, Wells Fargo’s growth in retail banking was the envy of the industry. Every quarter executives would talk about rapid account openings while focusing investors’ attention on the fabled “cross-sell ratio”, or the number of different products and services held on average per household.
“We’re Over Five! Shooting for Six! Going for Gr-eight,” read the bank’s annual booklet on its “Vision & Values” in 2006. In 2012: “Our average retail banking household has about six products with us. We want to get to eight . . . and beyond.” For a while Wells ranked as the world’s most valuable bank by market capitalisation.
Many people on the front line, however, such as Rasheeda Kamar, who arrived in the US aged 23 from Guyana, grew weary of the methods used. She and her staff at a branch in the sleepy commuter town of New Milford, New Jersey, had been harangued by regional managers for years before a big push at the end of 2010 known as “Jump into January”, in which everyone was expect to start the year with a surge of new accounts.
Sick with stress, she narrowly missed targets that month, and was then accidentally copied into an email with her draft letter of dismissal attached. She forwarded it in exasperation to Mr Stumpf, explaining that she had missed the mark because she was playing by the rules.
“I will not tolerate the movement of existing money just because we need checking account, solutions and profit proxy to move up on ‘the Motivator’,” Ms Kamar wrote in the email, seen by the FT, alluding to a daily report on the performance of all branches within the region. “The accounts have to make sense for the customer.”
She concluded: “We may never get the chance to meet, but know that there are employees who really care and then they get beaten down.”
Nothing happened. Mr Stumpf never saw her email, he testified to Congress last September, about a month before he resigned.
Ms Kamar now manages a branch of a bank more than 400 times smaller by assets than Wells. She says she felt sorry for Mr Stumpf when she saw him on Capitol Hill, with his shiny eyes and wobbly chin. “I saw like a little boy who had taken a cookie out of the cookie jar. I thought, ‘How pathetic.’”
The chief executive must have known what was going on, she says. “He knew the average bank was selling three products per household, but Wells was ‘deepening the relationship’ by selling eight? Please — he knew there was some kind of stress on lower-level people to make those targets. Otherwise all other banks are lazy.”
Mr Stumpf declined to comment.
Former Wells employees say senior managers never directly encouraged anyone to break rules. But the instructions were often implicit. Mr Hasratyan remembers a visit from a district manager who rattled off half a dozen ways to hit targets, adding that most were illegal and all were unethical. Nonetheless, staff picked up on the “reverse psychology”, he says. Some bank employees redoubled efforts to force new accounts on people who might struggle to say no — parking valets without much English, for example, or members of their extended families.
The manager in question declined to comment. He is now in construction; Wells confirmed he left the bank in January 2015.
A high-pressure sales culture was not limited to Wells Fargo, says Ruth Landaverde, who now works at a housing charity in Los Angeles. She lasted about a year at Wells, just after the financial crisis, when she hammered the phones trying to arrange high-cost loans to people with poor credit histories. Then she did five years at Bank of America, where the culture was essentially the same, she claims: set high targets, then drive staff to do whatever they could to hit them.
She lost her job at BofA after a dispute over an account she opened for a former roommate — an account she insisted was genuine, but which BofA viewed with suspicion. She now consults part-time for the Committee for Better Banks, an advocacy group, pushing for higher pay and improved working conditions at big banks across the country.
“It was like dangling a carrot in front of a horse,” she says. If staff kept falling short, for whatever reason, they would get a note on their files. If you were “written up” three times, you were out.
Both banks declined to comment on her case.
Wells says it has cleaned up its act. Since the scandal broke just over a year ago the bank has rehired more than 2,000 staff who had left the retail banking division, voluntarily or involuntarily, over the past six years, while coaching all staff on how to escalate concerns under a new “raise your hand” policy.
The bank has also combined disparate functions and oversight processes in a new unit called the Conduct Management Office, run by Theresa LaPlaca, a former chief financial officer in the wealth and investment management division. Had such a structure been in place a decade ago, she says, all those breaches of protocol might have been avoided: “We’d be able to see trends then. Because of the decentralised model, we weren’t able to.”
Ms LaPlaca also claims that Wells investigated every case of alleged retaliation against whistleblowers over the past five years, a period in which the scandal was “heating up”. She says the bank found no evidence of reprisals.
That does not ring true with Claudia Ponce de Leon, a manager who was sacked in September 2011 for what the bank said was drinking excessively and engaging in other inappropriate behaviour. (Ms Ponce de Leon denies these allegations.) Three weeks before she was let go, she had called the ethics line to report that at least three bankers under her supervision in Pomona, near Los Angeles, were opening accounts without permission.
Until her termination, the Peru-born manager appeared to be something of a model employee, promoted 10 times over the course of a decade and showered with commendations. Shortly after her sacking she complained to OSHA, which last year made a preliminary finding that her dismissal was retaliatory and that she deserved to be reinstated.
Wells appealed against the finding; a hearing is set for March next year. A spokesperson for the bank says that Ms Ponce de Leon was let go “based largely on concerns regarding her treatment of team members who worked for her. We believe this important aspect of the story must be raised in a full hearing before we return her to the workplace.”
According to Ms Ponce de Leon, Wells’ appeal is a sign that the bank has not yet turned a corner. She notes that despite a purge of the highest tiers of management, many middle and upper-middle managers are still at the bank.
A few days after her dismissal in September 2011, for example, Ms Ponce de Leon contacted John Sotoodeh, then president of the southern California region at Wells. In an email seen by the FT, she alerted him to “inaccurate portrayals of goals due to team members falsifying profiles and opening accounts to create the illusion that the numbers were greater than what they are”.
Wells Fargo itself has suggested Mr Sotoodeh could have been aware of outbreaks of fake accounts. In a report commissioned by Wells’ board on the fake-account scandal, released in April 2017, Mr Sotoodeh is described as having a “high-pressure management style” and “having presided over Los Angeles when it became the epicentre of the simulated funding phenomenon that came to light in 2013”.
But in 2014 Mr Sotoodeh was promoted to executive vice-president looking after six southwestern states from Texas. In May this year he was moved to Colorado, covering eight states as the lead regional president for the “Mountain Midwest”. His direct reports now number about 5,000, according to the bank, down from 15,000 before the scandal broke.
Wells declined to comment on whether Mr Sotoodeh saw the email from Ms Ponce de Leon, or whether the move to Denver amounted to a demotion. It also declined to make him available for interview.
“People that are still in charge were enablers,” says Ms Ponce de Leon. “So many people knew about this poor behaviour, but everyone at Wells Fargo was making money. They were looking the other way because they were getting fat and getting fed.”
Reporter: Ben McLannahan
Editor: Josh Spero
Picture and video editor: Alan Knox
Production editor: George Kyriakos
Sub editor: Philip Parrish
Los Angeles photography: Tod Seelie, Claudia Lucia
Los Angeles video: Tod Seelie
New York photography and video: Pascal Perich
Arizona photography: Christopher Barr
Washington DC photography: Justin Gellerson
Additional photography: Bloomberg, Getty Images
© THE FINANCIAL TIMES LTD 2017