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reguarding the wells fargo account fraud scandel: 1. what were the legal issues 2. what were...

reguarding the wells fargo account fraud scandel:
1. what were the legal issues
2. what were the ethical issues
3. what can be done to prevent frauds such as this from happending
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Answer #1

Breif of Well Fargo case :

The Wells Fargo account fraud scandal is an ongoing controversy brought about by the creation of millions of fraudulent savings and checking accounts on behalf of Wells Fargo clients without their consent.

1. LEGAL ISSUES INVOLVED :

a. Cross selling : Cross-selling, the practice underpinning the fraud, is the concept of attempting to sell multiple products to consumers.

b. Fake accounts opened :Employees opened accounts without customer consent. In an article from the American Bankruptcy Institute Journal, Wells Fargo employees reportedly “opened as many as 1.5 million checking and savings accounts, and more than 500,000 credit cards, without customers’ authorization.”

c) Fake credit cards: 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.

2. ETHICAL ISSUES INVOLVED :

Wells Fargo has a fiduciary duty to treat its customers fairly. The bank offered many different services to its customers. But the bank’s management set unrealistically high sales goals for its employees, encouraging many employees to game the system. If a customer bought one service, employees were urged to “cross-sell” several more. “Eight is great” was the company mantra. The only way that Wells Fargo employees could meet their unrealistic sales targets, and thereby keep their jobs, was to make up accounts that customers had not requested and often didn’t even know they were being charged for. Employees fabricated millions of fraudulent accounts in order to keep their bosses happy and remain employed. It was a classic conflict of interest.

3. HOW TO PREVENT :

a. Close attention to whisle blowers

b. Getting beware of arbitrary clauses in bank contracts

c. More legal regulations & strict consequences on frauds

d. Consumer awareness

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