Question

1. What accounting framework/standards were violated in the Wells Fargo scandal 2017 fake checking and saving accounts?

2. Why is the type Wells Fargo fake accounts scandal? Is it fraud, greed, lack of control, misuse of power, accounting manipulation, etc.?

Answer 1

1)

Wells Fargo violated the Fair Labor Standards Act (FLSA) by failing to pay overtime.

Wells Fargo’s former employees have spoken out about being forced to create fake bank accounts in order to meet impossible sales goals, and have claimed they were forced to work unpaid overtime to meet those goals. These employees claim they would stay extra hours at the office; if these hours were recorded, managers would go into the Bank’s time tracking software and reduce them. If employees tried to push back against these practices, they were threatened with termination, and, in several instances, employees who pushed back were fired.

The FLSA requires that non-exempt employees receive time-and-a-half rates of pay for every hour worked in excess of 40 hours per week. According to former employees, they weren’t paid at all for overtime hours that they worked. In response to these claims, the Department of Labor (“DOL”) is conducting an in depth investigation of the Bank’s employment practices for the past several years. The Wage and Hour Division of the DOL will review all complaints and alleged violations.

2)

Wells Fargo fake accounts scandal is fraud.

The reason is that the Wells Fargo clients began to notice the fraud after being charged unanticipated fees and receiving unexpected credit or debit cards or lines of credit. Initial reports blamed individual Wells Fargo branch workers and managers for the problem, as well as sales incentives associated with selling multiple "solutions" or financial products. This blame was later shifted to a top-down pressure from higher-level management to open as many accounts as possible through cross-selling.

Employees were encouraged to order credit cards for pre-approved customers without their consent, and to use their own contact information when filling out requests to prevent customers from discovering the fraud.

Employees also created fraudulent checking and savings accounts, a process that sometimes involved the movement of money out of legitimate accounts. The creation of these additional products was made possible in part through a process known as "pinning". By setting the client's PIN to "0000", bankers were able to control client accounts and were able to enroll them in programs such as online banking.

Hence the Wells Fargo fake accounts scandal is fraud

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