Wells Fargo Faces Additional Legal Woes

• Posted on: Nov 20 2017

During the past year, Wells Fargo has faced a number of scandals. In addition to the bank account scandal (here) in which millions of accounts were set up under customers’ names without their permission, the bank forced thousands of customers into car insurance they did not need, and also charged improper rate-lock fees to mortgage applicants.

Now, in a recent filing (here), Wells Fargo has disclosed that a number of employees have filed retaliation claims after they were fired for voicing their concerns over the bank’s practices. In one case, a former employee alleged “retaliation for raising concerns regarding automobile lending practices.”  In other cases, former Wells Fargo mortgage employees have claimed that they were terminated for complaining about improper mortgage rate-lock fees.

The bank has denied the claims.

The employment retaliation claims originally surfaced last year in connection with the bank account scandal when several employees alleged they were terminated after reporting the activities to the bank’s ethics hotline. According to some observers, this pointed to a pattern in which the scandals were followed by employee retaliation claims. (Here.)

While current Chief Executive Officer Tim Sloan has stated that employees would not face retribution for reporting unethical behavior, the recent filing noted that a number of employment litigation lawsuits have been filed against Wells Fargo, including class action lawsuits brought by former employees alleging adverse employment actions for raising sales practice misconduct issues. 

The bank also faces numerous single plaintiff Sarbanes-Oxley Act complaints and state law whistleblower actions filed with the United States Department of Labor or in various state courts alleging retaliation for raising sales practice misconduct. Earlier this year, the Labor Department ordered the bank to pay $5.4 million and reinstate a whistleblower who was fired after reporting suspected fraud to the ethics hotline.

The Auto Insurance Scandal

The auto insurance scandal is also more extensive than was previously reported. That scandal involved improper sales practices concerning the origination, servicing, and/or collection of consumer automobile loans, including related insurance products. Wells Fargo initially acknowledged last July that since 2012 as many as 570,000 customers were charged for auto insurance that they did not need. The recent filing reported that the bank is now accepting refund requests related to this matter dating back to October 2005. The estimated cost of the scandal is now $130 million, up from the previously reported amount of $80 million. 

Multiple class action lawsuits alleging, among other things, unfair and deceptive trade practices have been filed against the bank in connection with the auto insurance scandal. Allegations related to the bank’s auto insurance programs are among the subjects of two shareholder derivative lawsuits filed in California state court. These and other issues related to the origination, servicing and/or collection of consumer automobile loans, including related insurance products, have subjected the bank to formal or informal inquiries, investigations or examinations from federal and state government agencies.

What is whistleblower retaliation?

Whistleblower retaliation occurs when an employee is terminated, demoted, threatened, intimidated, harassed or subjected to a hostile work environment for engaging in the following protected activity:

• Reporting – Making a complaint about an alleged violation of law or company policy to an employer or government agency.
• Filing – Pursuing a claim, lawsuit or other legal proceeding.
• Testifying – Providing written affidavits or giving oral statements or testimony relative to a  legal proceeding.
• Opposing – Refusing to perform a task or activity that the individual reasonably believes is illegal. 

Takeaway

Being a whistleblower involves personal sacrifice and professional risk.  Many violations of the law go unreported because people who know about them are afraid of being disciplined, losing their job, being demoted, or being passed over for promotion. To address these concerns, Congress has passed numerous pieces of legislation that protect whistleblowers from retaliation, including the Whistleblower Protection Act, the Dodd-Frank Act, and the Sarbanes-Oxley Act. These laws are intended to encourage individuals to come forward with information about violations of law. As Congress recognized long ago, “few individuals will expose fraud if they fear their disclosures will lead to harassment, demotion, loss of employment, or any other form of retaliation.” Consequently, there should be a mechanism “to halt companies and individuals from using the threat of economic retaliation to silence whistleblowers, as well as assure those who may be considering exposing fraud that they are legally protected from retaliatory acts.”