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Fraud at Wells Fargo Case Study Analysis



Wells Fargo & Company, founded in 1857, is an American giant multinational bank that provides financial services. Its central offices are through the country, headquartered in San Francisco. In 2013 Wells Fargo was accused of fraud which was made public by the Los Angeles Times. Los Angeles Attorney filed a lawsuit against Wells Fargo in 2015; the lawsuit comprehended that the multinational Bank pressured its employees into committing fraud. In 2016 Wells Fargo paid a fine of US $185 million for the “illegal practices” it was accused of. It is one of the largest Bank in the United States of America and the lawsuit eventually let Wells Fargo dismissing 5300 of it’s employees, although they never formally admitted neither denied the allegations, but Wells Fargo fell into great scrutiny after the public allegations made, as they lost their market value, their prestige and their firm’s image to the whole world.


Analysis of the Case study

After the allegations made by the Los Angeles Times followed by the lawsuit by Los Angeles Attorney, the first step Wells Fargo was to appoint PricewaterhouseCoopers (PWC), to carry an investigation inside the company. And after one-year personal bankers, branch managers, district managers and a few regional area presidents numbering a total of 5300 were all fired.​​ Cross-selling and upselling was a method adopted by CEO of Norwest, Mr. Kovacevic, he sought this as effective method to be an alternative in customer relationship management. Up-selling was to add more units and cross-selling was to sell those additional items. Up-selling involved by increasing the sales of the purchased item or selling a more expensive item in return. Despite of having a high failure rate, this was inspired by the German Banks who exploited only the 1/3rd​​ of their customer’s cross-buying potential. In motivation for this tactic, Wells Fargo did have an internal “Sales Quality Manager” which took its customer’s consent for every sold product or services.​​ (Cockery, 2013)

What went wrong in the company?​​ 

According to one survey by German Banks they found that 75% of their managers were not satisfied with the success rate of their cross-selling methods. And with this report at hand Well Fargo though it best to introduce a rewarding scheme for cross-selling to it’s employees, but it rewarded their success and punished their shortcomings.​​ (Cockery, 2013).​​ A strategy so aggressive that unrealistic sales target​​ met with criticism and termination was a pressure at work, as Wells Fargo pushed on selling “eight” products to each customer. Carrie Tolesdt, one of the most respected and appreciated employee,​​ who was one the role models in Wells Fargo, found that the employees opened unauthorized deposit and credit card accounts for more than 2 million customers in 6000 branches.​​ Employees led themselves to commit fraud and identity theft in the name of high rewards and strict punishments. This led to low credit scores as they checked their accounts without authorization and hence making most of the customers accept high rate for loans​​ and they became​​ ineligible for mortgage loans.​​ Even after the allegations and insinuation of the scandal Wells Fargo continued to achieve its product-based goals.​​ (Cook, 2016)

Recommended Actions and Opinion​​ 

It is a fact that the management was unaccommodating, the CEO’s strategies were unrealistic and aggressive, and it did not match the capability of their employees, which led them to this fate of committing this fraud. Employees reported that Wells Fargo violated the Labor Laws as overtime wages were not paid, as reported. In my opinion Wells Fargo should’ve strategized a more​​ compensating and realistic goals for it’s employees. Instead of giving out a high reward, they should have given less reward without punishment this way the employees would’ve had the liberty to choose their goals for themselves.​​ (Colvin, 2017)

​​ One the recommended actions would be that the management should have been less strict and accommodating to the employees, giving them space and the environment to reach their goals. Now 5300 lost employees reported that their method was illegal and violating law which is why the CEO fell into the criminal investigation by the Senator, had it been carefully orchestrating their strategy they would have not fallen prey to this scandal and continue to meet their profits otherwise.


The CEO and the Chairman of the board must realize their roles to promote a better governance. This case study shows the aggressive tone towards their employees and disbarring ethical codes that is a sole part of the work environment. This case study is a mere example of ethical collapse and in inability to keep a check internally. This case study also shows that the external audits should have been educated with professional skepticism when they are to audit a firm. All of which led to CEO and the Chairman of the board to resign in 2016 leading to forfeit of an unvested equity of $41 million to Wells Fargo.​​ (Colvin, 2017)




Cockery, M., 2013.​​ Wells Fargo Struggling in the aftermath of Fraud Scandal,​​ s.l.: The New York Times.

Colvin, G., 2017.​​ The Wells Fargo Scandal Is Now Reaching VW Proportions/the-wells- fargo-scandal-is-now-reaching-vw-proportions.​​ [Online]​​ 
Available at:​​ 
http://fortune.com/2017/01/25/the-wells- fargo-scandal-is-now-reaching-vw-proportions
[Accessed 27 July 2018].

Cook, L., 2016.​​ The wells Fargo scandal: Is the profit model to blame?.​​ [Online]​​ 
Available at:​​ 
http://knowledge.wharton.upenn.edu/article/how the-wells-fargo-scandal-will-reverberate/
[Accessed 27 July 2018].



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