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Case Analysis – Wells Fargo fraud

Executive Summary

Wells Fargo was once the largest U.S. bank based on the market value of equity. In 2016, the organization had to pay a fine amounting to $185 million for “widespread illegal practices.” It neither denied nor admitted the charges of fraudulently creating fake customer accounts and requiring customers to pay some fees for the same. The fraud was a direct impact of the unrealistic goals created for employees by the CEO. The case of Wells Fargo’s fraud of fake accounts illustrates how the lack of an internal audit function and insufficient board oversight can cause damage to the company’s image and the eventual decline of its market value.

When Wells Fargo merged with Norwest Corporation in 1998, the then CEO emphasized using the sales culture of Norwest to Wells Fargo. He introduced cross-selling – the sales of additional items related to a previously purchased item – and up-selling – increasing order volume by focusing on similarly purchased items and services. These approaches eventually became a failure at wells Fargo because the sales quality manual required customer consent for every product or service sold to them. However, the management was not willing to let go of the pressure for its employees to raise sales. It occasionally rewarded bestselling staff and punished poor performance. For this reason, the bank oversaw the opening of thousands of accounts for customers without their authorization, committing fraud and identity theft. As the scandal broke and the scandal gathered public attention, the bank laid off many of its employees with the claim of reinforcing a strong risk culture.

The case shows a massive failure of risk management and audit. The board of directors is responsible for ensuring an effective leadership is selected to establish a long-term strategy and monitor the overall level of risk. It should contribute to the sustainability of the corporation and therefore is regarded a vital role to stakeholders. Internal auditors must assess risk and ensure there are internal control measures. Some of the staff at Wells Fargo from top positions resigned due to conflict with the CEO and other leaders. The cited reason was the lack of internal systems and controls. There was also a lack of courtesy and trust at the top leadership level. Leadership and governance affect firms’ ability to make effective strategic choices. It also impacts the ethical practices of an organization. The CEO focused on an aggressive cross-selling strategy that pushed the staff to engage in fraudulent activities to meet the expectations and avoid punishment. The management failed to treat their subordinates with courtesy as they pressured them to achieve unrealistic sales targets.

The case is a clear indication that workplace culture significantly influences the output of an organization. Incentives and rewards can help employees to achieve target goals, but only when used for realistic targets. Wells Fargo tried to influence employee performance using unrealistic goals coupled with punishment for poor performance. It demonstrates a failure in risk evaluation and management. Organizations that wish to retain or improve their market value must demonstrate ethical compliance in their strategic schemes.


Wells Fargo was once one of the most recognized banking institutions in the world. The bank, headquartered in California, offered banking services, investing, credit card, and financial services. In 2016, the corporation was involved in a multi-million scandal whereby its employees created thousands of accounts for unsuspecting customers fraudulently. To attain the goal of selling the given minimum of products for the company, employees engaged in unethical practices, such as issuing ATM cards and assigning PINs without customer authorization. Employees opened fake checking accounts for friends to meet the target. Other employees would lie to customers that some banking services were only available in bundles, causing customers to incur extra charges. Investigations were launched against the corporation when the scandal became known. Eventually, the court imposed a fine of USD 185 million on Wells Fargo. The case raises concerns about risk management and audit. This case indicates the failures of the bank’s management to assess risk and create sustainable goals for its employees. The management has a role in ensuring the targets are realistic and do not influence unethical practices in the workplace.

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