The Root Cause of Fraud In Wells Fargo
Fraud is defined as engaging in something with the intention of deception to others. In a more business-oriented angle, fraud may also be defined as a wrongful and criminal deception aimed at unlawful financial or monetary profitability. In the case of Wells Fargo, this was typically the definition used during their case.
Wells Fargo was sued in 2015 by the city of Los Angeles on the grounds of unethical and unlawful conduct. The company was accused of having secretly opened unauthorized bank accounts using their consumer’s names and identities. The results of the proceedings saw the company fined $185 million in resulting settlements.
The fraudulent acts were attributed to the over 5300 employees directly involved in the activities. The company’s CEO admitted to the activities dating back to the year 2011. These underhand activities saw the employees attain the company’s set quotas. The employees would perform transactions on fake accounts, which would later be closed after the processing of nonexistent transactions. The result led to the employees faking business activities, and subsequently, received bonuses for good workmanship.
Employees caught in this act after thorough investigation and interviews cited some reasons for getting involved. Top of these reasons showed that they were under a lot of pressure for results. Failure to meet quotas, in most cases, resulted in being fired. In an effort to maintain their jobs, the employees would thus result in the fraudulent activities. Subsequently, they cited the need to achieve bonuses to supplement their low salaries to be a reason for their activities. It is, therefore, safe to conclude that pressure, as well as greed are among the root causes for the fraudulent activities at Wells Fargo between the years 2011 and 2014.
Cavico, Frank J., and Bahaudin G. Mujtaba. “Wells Fargo’s Fake Accounts Scandal and its Legal
and Ethical Implications for Management.” SAM Advanced Management Journal 82.2