Wells Fargo hit with lawsuit over phony accounts

September 22, 2016
San Jose Mercury News

A Wells Fargo shareholder filed a lawsuit Thursday against the San Francisco-based bank’s officers and directors, seeking to claw back any bonuses or other compensation they may have earned due to the bank’s creation of as many as 2 million fake accounts on behalf of unwitting customers.

The complaint, brought by the Burlingame law firm of Cotchett, Pitre & McCarthy, alleges Wells Fargo’s senior ranks created an incentive system that allowed the fraud to occur, enabling the institution to meet sales targets and boost its bottom line. It accuses CEO John Stumpf and other leaders of breach of fiduciary duty, unjust enrichment and corporate waste.

Stumpf apologized for the fraud Tuesday during a grilling by the Senate Banking Committee, and the bank has been fined $185 million. About 5,300 employees have been fired for opening deposit and credit card accounts without customers’ knowledge or consent.

But the bank’s officers and directors have not been penalized or prosecuted, attorneys Joe Cotchett and Mark Molumphy said Thursday at a news conference.

“This lawsuit attempts to bring some accountability to the board level at Wells Fargo,” said Molumphy, an attorney for plaintiff William Sarsfield.

A spokesman for Wells Fargo declined to comment, referring a reporter to a recent statement to customers in which the bank pledges to install safeguards to prevent the fraud from occurring again. The bank has said it will pay $5 million in compensation to affected customers at about $25 per person.

Cotchett called the scheme a classic tale of greed.

“It’s another Wall Street scam designed to increase stock prices of banks,” said Cotchett. “This is stealing from their own customers.”

In some cases Wells Fargo employees used bogus email accounts and PIN numbers to set up the accounts, according to the Consumer Financial Protection Bureau, which levied a $100 million penalty on the bank earlier this month. Some consumers incurred unwarranted fees as a result of the abuse.

During Tuesday’s testimony, senators expressed outrage that the bank allowed Carrie Tolstedt, who oversaw the division where the fraud occurred, to retire in July with tens of millions of dollars in stock holdings and other compensation. Sen. Elizabeth Warren, D-Massachusetts, told Stumpf he should resign. The San Francisco Fed said Thursday that Stumpf is giving up his position as representative from the central bank’s San Francisco region on the Federal Reserve’s Advisory Council... (To read the entire article, please click HERE)