Wells Fargo's woes may be tip of the iceberg

The timeline of Wells Fargo's ongoing cross-selling scandal has been called into question as new details trickle out that suggest unethical sales practices may have been going on for much longer than the company's CEO has indicated.

Chief Executive John Stumpf has testified before Congress as saying upper management didn't realize there was a problem with the company's sales practices until 2013, when he learned that at least some of his employees had created bank accounts and opened credit cards in customers' names without their approval to meet sales goals. This potentially left customers on the hook for fines and penalties on accounts they didn't know existed.

After launching an internal investigation, Stumpf has said he wasn't aware of the scope of the problem until 2015. It is now estimated that as many as 2 million unauthorized accounts were created between 2011 and 2015 and that customers' sensitive information – in some cases their Social Security numbers – were used to perpetuate these practices.

The company has gone on record saying it laid off about 1,000 employees per year for such unethical sales practices dating back to 2011. Lawmakers and regulators have questioned how Stumpf's senior team wasn't aware of the scandal until years after evidence of impropriety had surfaced and the company had fired such a large number of workers for such activity.

But both Vice and The New York Times this week have unearthed interviews and documents that suggest these unauthorized accounts were being created years before Wells Fargo started axing employees – perhaps as early as 2005.

The Times spoke with former Wells administrative assistant Julie Tishkoff, who in 2005 wrote to the bank's human resources department, describing coworkers who were "opening sham accounts, forging customer signatures and sending out unsolicited credit cards." At least two employees the Times contacted said they had personally sent Stumpf letters as early as 2011 describing the problem.

Vice, meanwhile, published a redacted letter from former branch manager Dennis Hambek addressed to Carrie Tolstedt, who would go on to become the head of the company's community banking division and who announced her retirement in July – only a few months before regulators would hit Wells Fargo with $185 million in fines and penalties. Wells Fargo has since clawed back some of her retirement package that was believed to have weighed in at around $125 million.

In his letter sent in 2006, Hambek alleged that he had seen sales practices that amount to "blatant gaming [of the system] according to the code of ethics" and that "upper management is aware of this but say they don't want to know about it."

"Upper management" is a vague term in a company with as many corporate tiers as Wells Fargo, so Hambek is not specifically alleging that Stumpf knew or should have known about these sales practices that far back. But these publications would suggest that Wells Fargo's previous investigation – which looked specifically at sales activity between 2011 and 2015 – might only scratch the surface of the company's problems.

Stumpf has since announced that the company would be extending its internal review back to 2009, but he has yet to commit to any kind of formal proceeding before that point. Rep. Carolyn Maloney, D-N.Y., pressed Stumpf on this point at his recent testimony before the House Financial Services Committee, highlighting a 2007 Montana court case she had uncovered that detailed evidence of unapproved account openings at Wells Fargo at that time.

"We have agreed with our regulators to go back to 2011. We voluntarily said ... that we would go back to 2010 and 2009. I told our team to leave no stone unturned," Stumpf said at the testimony, though he made no specific commitment to extending the investigation further.

Wells was fined tens of millions of dollars and laid off more than 5,000 employees over the course of five years as a result of these sales practices. Stumpf and Tolstedt have seen earnings clawbacks, and the company's stock closed Tuesday nearly 11 percent lower than where it ended August – before the scandal was made public in September.

But in more ways than one, this may just be the tip of the iceberg. This week's media reports suggest Wells Fargo's banking improprieties could extend years beyond when the company is currently investigating, and a group of lawmakers led by Rep. Nydia Velazquez, D-N.Y., on Tuesday formally called on regulatory agencies to investigate Wells Fargo's small business lending division – which operates outside of the community banking division that's currently in hot water.

"The failure to hold senior executives accountable is inexcusable and leads us to believe this was a company-wide culture of deception, not the acts of rogue employees in the community banking division as Wells Fargo asserts," the lawmakers wrote in a letter jointly addressed to the Small Business Administration, the Consumer Financial Protection Bureau and the Comptroller of the Currency. "We fear that if unauthorized accounts were being opened by employees under pressure to meet incentive goals, it would have devastating effects on small business customers."

Lawmakers and regulators have also expressed interest in launching investigations into other areas of the domestic banking marketplace to see if the sales strategies at Wells Fargo were an isolated incident or an industry norm. A representative for Sen. Sherrod Brown, D-Ohio, told U.S. News last week that Brown and other government officials are interested in looking into broader problems in the banking sector.

"With what we've seen here at Wells Fargo, I have directed that we are to do a horizontal review, so we will be looking specifically at sales practices at our largest banks and mid-sized banks," Thomas Curry, who heads the Office of the Comptroller of the Currency, said at a House hearing last month.

Richard Cordray, the director of the Consumer Financial Protection Bureau, agreed with Curry's assessment, saying at the same hearing that the incentive-based sales practices are "a broader issue."

"Wells Fargo Bank no doubt was the industry leader in aggressively cross-selling products, which led in part to the extreme circumstance we find here," he said. "We're all going to go back on this and think more about what we can do to make sure that the cultures are changing at these banks."

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