Suit: Wells Fargo Preyed on Undocumented Immigrants to Hit Sales Goals

By Thomas Lee, San Francisco Chronicle

28 April 17

 

ells Fargo branches across the country deliberately targeted “undocumented immigrants” to open savings and checking accounts in order to meet aggressive sales goals, according to court documents.

In sworn declarations obtained by Burlingame plaintiff’s attorney Joseph Cotchett, former employees describe a scheme in which Spanish-speaking colleagues would visit places they knew were frequented by immigrants (including construction sites and a 7-Eleven), drive them to a branch and persuade them to open an account. Some employees would give the immigrants $10 apiece to start an account. The events described in the declaration go back a decade.

“The conduct we have come up with is scandalous,” Cotchett said. “It’s outrageous to think that regulators let the bank get away with this.”

The alleged scheme appears consistent with earlier reports of a runaway sales culture at Wells Fargo, where branch employees faced pressure to meet high sales quotas. But it raises fresh questions about whether bank employees merely deceived customers by opening accounts in their names — or further crossed a line.

Under federal law, banks must verify the identities of customers. The declarations offer no evidence that Wells Fargo skirted those requirements.

“These allegations are inconsistent with our policies, values and the relationships we work hard to build with all parts of our community,” company spokesman Ancel Martinez said in an email. “Wells Fargo has long been committed to providing banking services to immigrants in a manner that complies fully with the law, and we have controls in place to ensure we comply with requirements.

“These assertions are offensive, because they run counter to the expectations of Wells Fargo, and would be a violation of policies we have in place to safeguard against abuses,” he said.

But given Wells Fargo’s well-documented rush to hit sales goals, experts say it’s quite possible that employees did not follow procedures. In any case, targeting immigrants to hit sales goals should have raised red flags among the bank’s many compliance and risk officers, banking experts said.

The crude nature of the bank employees’ actions suggests that the bank was more interested in opening accounts than doing the necessary due diligence and sincerely wanting to help immigrants with their financial needs, said Clifford Rossi, a former chief risk officer at Citigroup’s consumer lending unit who now teaches finance at the University of Maryland.

“It’s hard for me to think that they were trying to do the right thing,” he said.

The documents were filed Wednesday as part of a shareholder lawsuit filed by Cotchett in San Francisco Superior Court against Wells Fargo’s top executives.

Last year, the San Francisco banking giant admitted that thousands of employees created up to 2 million fraudulent accounts in the names of real consumers without their consent.

Wells Fargo ultimately fired CEO John Stumpf and paid $185 million in fines. A report commissioned by the board of directors concluded that the bank’s aggressive culture pressured employees to commit fraud. But the report absolved the directors of any wrongdoing, blaming Stumpf for failing to detect the fraud and inform the board.

Cotchett’s lawsuit specifically targets the board, arguing the directors were negligent and violated their fiduciary duty to shareholders.

“If they didn’t know about (the fraud), then they are at least incompetent,” Cotchett said.

At Wells Fargo’s annual shareholders meeting Tuesday, the directors all won re-election, though narrowly in some cases.

The latest accusations add a twist to the Wells Fargo scandal, as it suggests a level of sophistication and coordination among employees at disparate branches that the company has not previously acknowledged. The board report, for example, does not mention any acknowledged fraud involving immigrants.

Under the USA Patriot and Bank Secrecy acts, banks must develop a customer identification program that would give them reasonable assurance that account holders are who they say they are. Undocumented immigrants can open accounts, as long as they have an address, driver’s license and Individual Taxpayer Identification Number from the Internal Revenue Service. The IRS grants such numbers, akin to Social Security numbers, without regard to immigration status. Some banks also accept foreign passports or other forms of identification, like Mexico’s matrícula consular.

Wells Fargo said it accepted such “consular cards” as a form of identification.

“We have no indication that consular card customers were disparately impacted among the 2 million accounts we analyzed that may have been unauthorized,” Martinez said.

In his declaration, Denny Russo, who worked at Wells Fargo from 2008 to 2011, said the branch manager told employees of Latino descent to “corral” Hispanic day laborers who would gather at a 7-Eleven store in Petaluma.

“The Wells Fargo employees were instructed to ‘round up’ a group of the undocumented workers and drive them back to the Wells Fargo branch to open up checking and savings accounts in exchange for ‘waiving’ check-cashing fees that the day laborers would otherwise have to pay,” Russo said.

“My colleagues constantly went to and from this location to try to meet their sales goals,” he said. “Based on discussions with other Wells Fargo employees and managers, I was aware that these practices ... were also widespread throughout the state of California.”

In her declaration, Kelsey Hess, who worked as a teller in Draper, Utah, from 2013 to 2014, described a similar scheme in which employees would target immigrants at construction sites and a nearby Coca-Cola plant.

“Many of the factory workers could not have bank accounts because of their immigration status,” Hess said. “With management permission, tellers promised to give the factory workers cash to sign up new accounts.”

Julia Miller, who worked as Wells Fargo branch manager in Macungie, Pa., described “Hit the Streets Thursday,” in which bankers and tellers of Latino descent were told to “patrol the streets and local security offices for new potential clients and ... get them into local branches and pressure them into opening new accounts,” according to her declaration.

Banks in the past have courted Latino immigrants, who are often “unbanked” and who represent a potential rich pool of new customers.

Fifty-three percent of Mexican immigrants and 37 percent of other Latin American immigrants are unbanked, compared with 20 percent of immigrants from Asia and 17 percent from Europe, according to a report by the Federal Reserve Bank in Kansas City.

Winning new customers is very difficult; to do so, banks will either open new branches or acquire competitors for their customers, said Mike Arnold, co-owner of Alco Partners, a consulting firm that advises financial institutions on risk management.

But once you get a customer, that person is unlikely to change banks because of the inconvenience of closing down an account and opening a new one, he said.

“The stickiness of the customer is what makes them real valuable,” said Arnold, a former executive at Citigroup and Bank of America.

But Arnold said he has never heard of a bank targeting immigrants living in the country without legal permission. The risk to the bank’s reputation and operations would be severe, he said, if Wells Fargo did not make sure employees complied with identity-verification rules.

Many immigrants who entered or remain in the country without authorization avoid mainstream financial institutions, and experts say it hard to believe Wells Fargo employees were able to overcome their fear of banks during these “round-ups.”

“Undocumented immigrants are also concerned that banks will share their information with immigration officials, or that they wouldn’t be able to access their funds if they are deported,” according to a report by the Federal Reserve Bank in Richmond, Va.

“This is a real fear among undocumented immigrants and a potentially high barrier to overcome, because it could mean the difference between staying and working in the United States (and sending money back home) and being forced to leave the country,” the report said.

Richard George, a San Francisco-based principal of the Bank Experts Group, a firm that provides expert court testimony to financial institutions, said he has never heard of a bank targeting immigrants living in the country without permission in order to meet sales goals.

But that it happened at Wells Fargo seems about right, said George, a former executive at Citibank and consultant at McKinsey & Co.

“It doesn’t surprise me that some enterprising branch manager under pressure to meet sales goals would come up with all sorts of ways” to open new accounts, George said.