By Steve Zeltzer
The growing criminal corruption scandal at Wells Fargo Bank, which opened up 2 million fake customer accounts and then retaliated against bank employee whistleblowers, is quickly spinning out of control with potentially catastrophic results for the bank and the world financial system. One of incoming President Trump's first actions in fact might have to be seizing the nation's 4th largest bank to prevent a complete collapse when millions of depositors find out that criminal indictments of the bank’s top officers are looming.
The likely targets of the federal Grand Jury that was empaneled by the Justice Department to explore what appears to be wide spread corruption include recently departed Wells Fargo CEO and Board Chairman John Stumpf. Stumpf was given a pass by the Obama Administration’s Attorney General Loretta Lynch, and allowed to exit the bank with $100 million when he testified at a Congressional hearing on September 29, 2016, that he had no knowledge the over 2 million fake accounts had been created, even though Wells Fargo had bullied and eventually fired some 5,300 employees who had been coerced into creating the illegal accounts. Some of those employees had complained about the pressure and refused to bow to the pressure, and subsequently filed complaints with the Labor Department’s OSHA Office of Whistleblower Protection Program WPP.
The effort by Wells Fargo employees to report the fraud to federal regulators was stymied when OSHA failed to take any action on their complaints that would have led to reporting them to the federal financial regulators. Questions have already surfaced as to how that happened, and Secretary of Labor Thomas Perez promised in October to conduct a “top to bottom review” of OSHA’s management of these complaints. However, Perez never followed through on that promise and OSHA continues to bottle up Wells Fargo whistleblower complaints, some of which have languished for up to five years without action.
According to OSHA Regional Investigator, Darrell Whitman, he was given the Yesenia Guitron and Judi Klosek whistleblower complaints in late 2010 with an order to close them without an investigation. According to OSHA records, the two complaints had both been filed on May 11, 2010 and reported to Wells Fargo senior legal staff in Los Angeles shortly thereafter. Wells Fargo acknowledged receiving the complaints, but never offered a defense, which according to Whitman should have resulted in a quick merit finding and reports to federal regulators. Instead, it appears someone in OSHA management excused Wells Fargo from filing responses, apparently with assurances the complaints would not be investigated. That failure to investigate resulted in no notice of these reports of fraud being given to federal financial regulators. Whitman later in early 2012 was briefly assigned to another complaint of fraud similar to those made by Guitron and Klosek. That complaint was removed from Whitman only 3 weeks later, after he openly challenged OSHA’s management of whistleblower complaints. As of late 2016, that third case has to be fully investigated, leaving both federal regulators and the complainant out in the cold.
In the wake of the public outcry about Wells Fargo, Congress held hearings in September and then asked the U.S. Department of Justice to conduct an investigation into potential criminal activity associated with Wells Fargo’s practices. In early December, the Justice Department empaneled a federal Grand Jury in San Francisco and tasked it with reviewing evidence to determine whether there were grounds to indict. The U.S. Attorney’s Office for the Northern District of California then issued a subpoena on December 12 to Ms. Guitron and Ms. Klosek, ordering them to produce all documents relevant to their work at Wells Fargo and to their legal complaints after they were terminated. The structure of the subpoena indicated that indictments could include not only Wells Fargo managers and senior officers, but also managers and officials in OSHA and the Department of Labor who were involved in concealing Wells Fargo complaints.
In addition to reporting potential fraud in Wells Fargo’s management of customer accounts, Guitron also reported a pattern in the creation of illegal accounts that particularly targeting Latinos who were being asked to sign documents that they could not read. These documents authorized Wells Fargo to set up fake accounts and/or create fake credit card application that were subsequently used to loot their accounts. Guitron and Klosek were both terminated by Wells Fargo in February 2010, and filed their complaints with OSHA because under federal law such complaints had to be reviewed by OSHA’s Whistleblower Protection Program because they could take independent enforcement action. According to Guitron, who gave an extended interview that was broadcast by NBC Bay Area, she was never contacted by OSHA after filing her complaint, and never knew why OSHA failed to take any action. Had OSHA properly handled the Guitron and Klosek complaints, both of these whistleblowers would have been entitled to reinstatement with back pay well before OSHA closed them.
Wells Fargo workers described mental health nightmares associated with the pressure to open fake customer accounts. Susan Fischer, a former Wells Fargo branch manager in Arizona, said after experiencing "bullying, punishment and intimidation" at Wells Fargo, which impacted her self-esteem and mental health, she suffered "severe depression and anxiety". As Fischer observed, "The culture of corruption was not easy on managers”, who were pushed to pressure employees to open unauthorized accounts beginning in 2007. Ultimately, Fischer had to take medical leave and then resigned in 2008 due to the stress. "It was an extremely dark period for me," she said."
For Guitron, the story only different in detail. She and Klosek were immediately targeted by senior Wells Fargo management when they began to raise concerns about the fake accounts that were being created. These managers responded to her whistleblowing by falsifying a paper trail that purported to document her poor performance, forbidding her from taking family medical leave, and then firing her. Once her case was dropped by OSHA, Guitron was forced to take her complaint to federal court, which she predictably lost. Federal courts have little expertise in whistleblower law and notoriously side with employers. Deprived of an OSHA investigation that could have developed strong evidence supporting her complaint, her attorney was left in a David and Goliath battle that few attorneys win.
The lynchpin of many of these cases was Darrell Whitman. Whitman - a lawyer and OSHA Regional Investigator with the Whistleblower Protection Program has systemically documented management wrongdoing. This includes dismissing complaints without any investigation, as in the three Wells Fargo cases he handled, but also collaborating with major corporations to prevent their accountability for violations of law. Whitman eventually became a whistleblower himself, offering interviews to various reporters and appearing on Jon Stewart’s Daily Show. Whitman and four other Regional Investigators were forced out of there their jobs in 2015 after years of fighting corruption in the Whistleblower Protection Program. Whitman now has a complaint that is under review by the federal Office of Special Counsel. The complaint it accompanied by a 216-page affidavit and similar affidavits by more than 15 other federal workers and whistleblowers. The affidavit chronicles a five-year period during which Whitman says he watch more than 20 complaints mismanaged and improperly dismissed, many of them against powerful national corporations, including: FedEx, Lockheed Martin, PG&E, Test America (formerly owned by H.I.G. Capital), J.P. Morgan Chase, Country-Wide Financial, and Wells Fargo. As Whitman notes, these were small or isolated incidents, but involved very serious complaints about threats to worker and the public safety and health, national security, and systematic financial fraud.
In the case of Wells Fargo, Whitman says he is very skeptical about internal investigations of wrongdoing by federal officials. When he first began to report problems with OSHA Region IX, he was aggressively attacked by local management. When he escalated his concerns to the National Director of the Whistleblower Protection Program, first one and then another of the Directors were themselves removed for complaining about program mismanagement to OSHA Director, Dr. David Michaels. Then, in May 2014, Whitman went to the top, writing to Secretary Perez about the culture of corruption in OSHA. This last report led to a retaliatory investigation of Whitman and other OSHA investigators that laid the foundation for his termination and another investigator being fired and three other investigators leaving because of the severe hostility of OSHA management. He himself was ordered to falsify his reports by his manager and lawyer Josh Paul and was later bullied and fired.
Whitman is now seeking an independent and “credible” investigation of the Whistleblower Protection Program, and particularly of the role that OSHA chief David Michaels and Department of Labor Secretary Tom Perez have played in attempting to insulate the program from accountability. His report to the Office of Special Council, which was first made in January 2015, has yet to produce any results, and his complaint to the OSC, first made in May 2015 after he was fired, has languished for lack of definitive action. Whitman is hopeful this most recent action by the Department of Justice and the Grand Jury may finally prompt meaningful questions and answers and bring to light how this program degenerated into a culture of corruption.
Whitman, who was a union steward representing his AFGE Local to the San Francisco Central Labor Council, has also sought the support of David Cox, the President of the American Federation of Government Employees AFGE. After some delay, President Cox Whitman responded by offering to support Whitman by assigning an AFGE attorney to assist in the case. But to date nothing has materialized, and Whitman has noted that the support has been at best lukewarm and largely concealed. After Perez promised to conduct a review of the Wells Fargo complaints handled by OSHA, an AFGE representative was appointed to assist in the review. But that too has faded, as it appears Sectary Perez has abandoned his promise.
Meanwhile, the Wells Fargo case grows more explosive by the day. As investigations continue, they unravel a sordid tale of connections between Wells Fargo, major corporations and senior members of the Democratic Party. To the embarrassment of the Democratic Party, it arranged to hold its national convention in Philadelphia, housing it in the Wells Fargo Center. Wells Fargo also generously supported the conventions itself, making one of the largest corporate contributions. In another case, J.P. Morgan Chase, the nation’s largest bank by assets, was recently fined for pushing its own high-risk investments on clients without fully disclosing the bank’s financial interests. When Johnny Burris, a financial advisor working with the bank resisted, he was not only fired but J.P. Morgan Chase then conspired to have his license as a financial consultant revoked. After he was fired, Burris, filed a whistleblower complaint with OSHA, and then sent letters directly to Secretary Perez, copied to Senator Elisabeth Warren, among others. That appeared to draw some attention to his case, but his optimism was short-lived, as OSHA once again seemed to lose interest in doing its job.
More recently, President Obama and Secretary Clinton have openly campaigned to have Tom Perez appointed as head of the Democratic Party, throwing their considerable political weight around the choice. Perez has long been identified as an Obama loyalist and a close friend of the Clintons. Yet, there is also considerable evidence that Perez has been personally involved in concealing corruption in OSHA, and may even now be a target of the Grand Jury. Certainly, Obama and the Clintons must be aware of these developments, in part because Whitman copied his May 2014 letter concerning a culture of corruption to President Obama, as well as other senior Democratic politicians. If it is found that Perez was involved in an obstruction of justice regarding Wells Fargo fraud and other corporate crimes, it will inevitably raise questions about his associations with Obama and the Clintons.
Eventually, the developing investigation of criminal activity involving Wells Fargo management will begin to take a toll not only on its retail customers, but also on its shareholders and business partners. Already, new questions have been raised about Wells Fargo attempting to fraudulently foist Prudential life insurance policies on its customers, and in the recent past the bank was forced into a settlement regarding defrauding student loan applicants. It is also now under pressure for failing its financial stress tests, outlining how it can effectively deal with a financial crisis. It is already losing customers by the droves. This drumbeat of bad news is likely to be amplified by parallel reports of collusion between the bank and high-level politicians, with the scope of the criminal investigation of Wells Fargo growing steadily wider and deeper. It is hard to see any other end than a federal takeover of the bank especially when the customers start a run on this bank to save their money. Because it is one of those “too big to fail” banks, even Donald Trump may find it impossible to avoid this path because it is likely that Wells Fargo is not alone in this sea of corruption.
It should be turned over the post office where it could it could be run as a public bank for working people and run by postal workers but this is not obviously any part of the Trump agenda. In any case, get ready for more earthquakes in 2017 as the capitalist corruption crises deepen.
Steve Zeltzer is host of Pacifica KPFA WorkWeek Radio