Finance News & Insights

What Finance can learn from Wells Fargo’s $5.4M whistleblowing disaster

When you offer a company “ethics” hotline for reporting suspicious or fraudulent behavior and then fire an employee for using said hotline, you can hardly be shocked when the feds come down hard on you.

Wells Fargo is once again making national headlines for its less-than-ethical business practices. This time the lending giant found itself in the cross hairs of the Department of Labor’s Occupational Safety and Health Administration (OSHA) over the termination of a whistleblower.

Bank, mail and wire fraud

According to OSHA, a Well Fargo manager, who wasn’t identified, was dismissed in 2010 after he reported incidents of suspected bank, mail and wire fraud by two Los-Angeles-area bankers. The managers reported the alleged illegal behavior to his own superiors as well as on a Wells Fargo hotline.

Despite positive job performance reviews, the whistleblower was told he had 90 days to find a new job at Wells Fargo after he reported the bankers. He was then fired after his search was unsuccessful. He has been unable to find work in the banking industry since.

Wells Fargo was ordered by OSHA to pay the former manager $5.4 million in back pay, compensatory damages and legal fees because the agency determined his warnings about the illegal behavior were at least a contributing factor in his termination. The damages award appears to be the largest in a Sarbanes-Oxley whistleblower retaliation case.

But that’s not all. The feds also ordered Wells Fargo to reinstate the fired manager to his former role.

For its part, Wells Fargo spokesman Vince Scanlon said in an emailed statement:

“This decision is a preliminary order and to date there has been no hearing on the merits of this case,” he said in the statement. “We take seriously the concerns of current and former team members.”

While Wells Fargo can appeal the decision, it doesn’t stay the preliminary order, according to OSHA.

Unauthorized account scandal

This is the second major publicity crisis Well Fargo faced in the past year. Back in September, regulators revealed that Wells Fargo employees opened unauthorized accounts for customers in an effort to meet aggressive and highly unrealistic sales targets. That scandal prompted investigations, congressional hearings and even led to a leadership shakeup, bonuses being denied to execs and some senior managers losing their jobs.

 

A plan, even for the squeaky-clean

Hopefully you aren’t too concerned that any employees would have a shred of reportable info on happenings in your company. Still, the new rules offer a reminder that your company should have:

  • a clearly spelled out and publicized compliance program
  • an anonymous whistleblower mechanism, and
  • a policy stating there is no tolerance for retaliation.

 

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