CORPORATE BAD BEHAVIOR IS COMMONPLACE
Corporate greed drives a range of bad behaviors including the cheating of customers. Here are two examples: Wells Fargo and Citizens Banks have both recently paid settlements related to schemes that cheated customers. In addition, they, particularly Wells Fargo, have a history of illegal behaviors. Corporate bad behavior is frequent, varied, and often repetitive, i.e., commonplace, making it clear that corporations view paying penalties for bad behavior as simply an acceptable cost of doing business. If we want to stop corporate bad behavior, there must be more enforcement with greater penalties
(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)
Wells Fargo Bank has a long-running record of bad behavior. Most recently, it agreed to pay $1 billion to settle a class-action lawsuit. The suit was brought by shareholders who accused Wells Fargo of making false statements about its progress in implementing reforms in response to its 2016 fraudulent accounts scandal. As a result, when the truth about the failures of its reforms became public, the value of its stock took a dive. [1]
As you may remember, in 2016, Wells Fargo acknowledged opening millions of unauthorized accounts for customers. It fired over 5,000 employees who had opened the fraudulent accounts in order to keep their jobs or earn bonuses. Based on the fraudulent accounts, some customers were charged overdraft fees and some had their credit scores damaged. Wells Fargo’s CEO ultimately lost his job and another senior executive is being prosecuted. The Federal Reserve imposed a series of consent orders on Wells Fargo in 2018 requiring it to remedy its corporate governance and penalizing the company in multiple ways.
Between 2018 and 2020, Wells Fargo touted its progress on complying with the remedial consent orders in public statements and regulatory reports. In reality, it was failing to implement meaningful reforms, failing to develop adequate remediation plans, and failing to meet remediation deadlines.
Overall, since 2000, Wells Fargo has paid penalties of almost $26 billion for 236 offenses of a variety of kinds. [2]
Citizens Bank recently agreed to pay a $9 million penalty in response to a Consumer Financial Protection Bureau lawsuit over violations of consumer protection laws covering credit card customers. Over a five-year period, Citizens Bank made roughly 25,000 of its credit card customers who filed disputes or fraud claims jump through onerous and illegal hoops. In many cases, it failed to return the full amount due to customers and failed to communicate with customers in a timely fashion. It required some customers to file notarized fraud affidavits and some to agree to appear as a witness in court in order to pursue their complaints. Their complaints were automatically dismissed if they could not or refused to comply. Under the terms of the settlement, Citizens Bank, which had discontinued use of the fraud affidavits, agreed not reinstitute their use. [3]
Overall, since 2000, Citizens Bank has paid penalties of almost $150 million for 17 offenses of a variety of kinds. [4]
These, of course, are just examples of corporate bad behavior, which is frequent, varied, and often repetitive, i.e., commonplace. If you need any convincing of this, I encourage you to explore the Violation Tracker database compiled by Good Jobs First. Just put in the name of any corporation and see how many offenses they’ve had since 2000 and how much they’ve paid in penalties. This makes it clear that corporations view paying penalties for bad behavior as simply an acceptable cost of doing business.
Therefore, if we want to stop corporate bad behavior, there must be more enforcement with greater penalties. More on this in a future post.
[1] Gregg, A., 5/17/23, “Wells Fargo agrees to $1b shareholder settlement,” The Boston Globe from the Washington Post
[2] https://violationtracker.goodjobsfirst.org/parent/wells-fargo
[3] Murphy, S. P., 5/24/23, “Citizens Bank agrees to pay $9 million after suit on behalf of some customers,” The Boston Globe
[4] https://violationtracker.goodjobsfirst.org/parent/citizens-financial-group