Question

Wells Fargo account fraud scandal Wells Fargo agreed to expand its review after Washington lawemakers lambasted the company following former Chief Executive Officer John Stumgfs testimony last September about the bank's sales practices, Under pressure, the bank agreed t review records dating back to soo9, rather than through soti as it initially did. Wells Farzo & Co. sald ensployees created two-thirds more bogus accounts than initially thought, a sign the bank is still strapaling to move past a scandal that sparked record fines and congressional investigations, An outsidle review found an additional x.4 millios potentially unauthorised d The company said it has paid or identified $107 million in eustomer compensation related to the lnvetigation. The figure inchales $7 million of refenda, wp froes 33 million the bank had previously disclosed.It also includes $37 mllion related to what it described as the "complaints process/mediation and credit-card accounts opened when the bank was encour mulktiple products to retail customers, bringing the total to about 3.s million according to a statement Thursday from the Samn Prancisco-based firm. The revised estimate covers January z0o9 to Septemlber 2016, almost twice as long as the period examined in the initial rrview Today's announcement is a reminder of the disappoiatment that we caused to our customers and stakeholders,CBO Tim Sloan sald on a comference call Tharsday with reporters. "We apologize to everyone who was harmed by unecceptable sales practices of even more frasdulent accounts threatens to catapult Wells Fargo back into the political erosshairs just as Congress returns Sept. s from its summer recess. The scandal came to light almost a year ago after regulators slapped Wells that occurred in our retail bank Fargo with fines of $185 million over its sales practices, prompting congressional Democrats led by Representative Maxine Waters of Califorsia earlier this month called for a House Financial Services Committee hearing about a separate scatdal at Wells Fargo involving unwanted car insurance imposed on auto-loan customsers. And hearings and resulting in the bank naming new leaders, clawing back executives' pay and beginning an overhaul of its retail division. Senator Elizabeth Warren of Massachasetts wrote to the Foderal Reserve to again press for the removal of board membens who served during the original uccouts review period of 2011 to 2015 tight on financial firms, while Republicans will continue to fault Consumer Financial Protection Bureau officials for not spotting the misconduct themselves, Boltansky Third-Party Probe estimate was The lender warned investors in March that its initial probably too low, saying in its annual ling that a new search by a third-party firm could lead to, among other things, an increase in the identified number BUS1053 In Class Exercise Name: Date Wells Fargo has worked to minimize the impact of the new tally, describing the additional accounts as those it couldn't rule out from lacking customer authorization. The company said in the statement that it erred on the side of its customers during the review, so the figures might include some accounts that were properly authorized. When it fined Wells Fargo last year, the CFPB ordered the bank to identify all customers affected by its sales misconduet and set aside ss million for those harmed. Customer Payments Wells Fargo paid $3.26 million to customers covered under that order through June 30, as well as one from the Office of the Comptroller of the Currency and a judgment from the Los Angeles City Attorney, according to the bank's most recent quarterly filing. In August, Sloan said refunds and payments to affected customers and others he didn't identify were "exceeding $5 million. The 2016 analysis found the bank charged $2 million in fees on 85,oo0 deposit accounts that were probably opened without authorization, according to the CFPB's order. About 14,000 bogus credit-card accounts were billed approximately $403,000, the agency said. The new review doesn't go back as far as 2002, the year that executives first knew about the sales misconduct and fired employees over it, according to investigators hired by the company's board. Lawyers representing customers who said they were harmed by the bank's 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 Explain what the scandal was in your own words 1. 2. What in your opinion, caused this failure in ethics? Explain fully.

Answer 1

The wells fargo scandal was largely due to fraudulent sales practice where various unauthorised deposit, cresit card accounts were opened which were bogus andmany other customers were charged inadvertently with insurance policies which were never bought.

The failure in ethics was largely due to corrupt management practices and lack of top class third party auditing. Moreover the board of directors ignored such malpractice which aggravated the problem and the lack of risk management committees and internal audit teams caused this to be big scandal.