Introduction

This is “What Just Happened?,” the podcast that looks at the biggest brand crises of our time, what they meant for organisational strategy and behaviour, and their lasting impact on our approach to crisis communication.

I’m Kate Hartley. And I’m Tamara Littleton. And together, we’ll delve into what happened, why it mattered, and whether it could happen again.

Episode 

Tamara Littleton: Kate, what crisis are we covering today?

Kate Hartley: Well, today, Tamara, we’re discussing a crisis that spanned more than a decade. It shocked the US banking industry, led to a CEO losing his job, and resulted in class actions from consumers. We’re looking at the impact of corporate culture, whistleblowing, and trust. So today, we’re going to delve into the Wells Fargo fraud scandal.

TL: That’s got a lot going on there. I’m looking forward to getting stuck in. Firstly, can you explain what happened?

KH: There is a lot to unpack here, but in short, on 8th September 2016, Wells Fargo was fined $185 million by various authorities in California. The fine was for setting up more than 2 million fraudulent bank accounts and credit cards in customers’ names without their knowledge, which is just mind-boggling. It had been going on for years, and customers only started to find out when they were charged unexpected fees, or received a card in the post they hadn’t ordered.

In some cases, they even got letters from debt collectors, which is obviously quite frightening. Amazingly, some customers never knew about it at all; sometimes accounts were being opened and closed immediately, completely illegally, and without their knowledge. In some instances, employees even used fake email addresses for customers. We’ll dig into why that happened in a moment.

TL: That’s huge. How on earth did this happen?

KH: Exactly, how indeed. It had been going on since 2011, which makes it even more shocking. This wasn’t a one-off event. The reason employees were doing it was to meet their sales targets. Many employees have said there was an aggressive sales culture at Wells Fargo, and they were rewarded by the bank for upselling or cross-selling products to customers. A lot of employees said they were under real pressure to sell new products.

TL: Are we talking about a few bad apples here, or how many employees were involved?

KH: No, it wasn’t just a few. About 5,300 employees were fired as a result, which is quite staggering, isn’t it?

TL: OK, that’s a lot. Let’s back up a bit, though. What do we know about Wells Fargo? Can you give us some context?

KH: Yes, it’s worth looking at. Wells Fargo was founded in 1852, so it’s a really old and established bank. It was founded by Henry Wells and William Fargo in California, in San Francisco and Sacramento, and it was known as an innovator quite early on. It was also recognised for treating customers well, regardless of who they were or how much money they had. They were known for promoting diversity and were one of the first banks to translate their services into Spanish and Chinese, for example, to reach a wider group of people. Before this scandal, it was really the darling of the markets and was listed on Fortune’s Most Admired Companies list, particularly for its social responsibility and financial soundness. Now, those are two aspects that will definitely be called into question in the next few minutes.

TL: We’re going to be unpacking that. If it had been going on for so long, how did it come to light? Were people speaking out? Are we talking about a whistleblower situation here?

KH: Yes, we are definitely talking about a whistleblower situation, and this, I think, is the really interesting part. Seven years earlier, in 2008, Yesenia Guitron, who was also known as Jesse, joined Wells Fargo. She told CBS News that they had something called a “Go for Gr8” — number eight, I hate that — which meant that every day, employees had to open eight new accounts for customers. That was the target.

She said it was fairly easy to start with, by going to friends, family, and people you knew, but eventually, you run out of people. So, employees began targeting more vulnerable clients, anyone they could possibly bring in, and the pressure on them was enormous. Of course, this didn’t align at all with their mission statement. She quickly realised that this kind of pressure was leading employees to engage in fraudulent activities, and it wasn’t just limited to her branch. She was working in a small town with 5,000 people, but this was happening across the country.

She observed employees being devious, offering free services in return for accounts that never materialised, or receiving $25 for what they called a “lead account,” which included monthly fees. Customers ended up being overdrawn because they were charged fees they weren’t expecting, having been mis-sold products.

Some employees opened accounts using false information. For instance, an 11-year-old boy had his birthdate altered to show he was 16, allowing him to open a bank account — that’s clear fraud. Jesse complained to her supervisor, but nothing happened. She then spoke to HR, but again, nothing was done. She even called the ethics hotline, which existed but proved ineffective.

Eventually, she complained to her regional bosses and was told, “Oh, this is just a misunderstanding,” but she was very clear it was fraud. It was incredibly brave of her to keep pushing, insisting that it was wrong. She began compiling evidence, and in 2010, she was fired without warning. She filed a lawsuit against Wells Fargo, claiming the bank falsified a paper trail showing poor conduct, but she lost her case because a federal judge said it was reasonable she was fired for not meeting sales quotas.

Interestingly, this goes back to the aggressive sales quota policy we’re discussing. But she wasn’t the only one concerned or the only one to speak out. At least five other whistleblowers in different locations had also come forward, saying they had been fired after reporting fraud, and again, there were issues related to not meeting quotas or other alleged performance problems.

TL: It’s very “Wolf of Wall Street,” isn’t it? Thinking about Wells Fargo, when the whistleblowers began speaking out, how did the bank respond?

KH: They initially took responsibility quite quickly. By the time the fines were imposed in 2016, they had already fired the 5,300 employees involved. A few days after the fine, Wells Fargo announced it was ending its employee sales goals programme, which it did. Soon after, the FBI and federal prosecutors in New York and California began their own investigations, opening the possibility of criminal charges against Wells Fargo and some individuals.

The bank was then under investigation by nearly every conceivable authority: the US Securities and Exchange Commission (SEC), the Department of Justice, California State prosecutors, you name it. As a fun fact, Kamala Harris was the Attorney General of California at this time and led the team that launched the criminal investigation into Wells Fargo.

However, overall, their response was pretty poor. Although they began by taking action against those responsible, when you look deeper, it’s clear that their approach was insufficient. For instance, there was an early statement that tried to minimise the damage, a tactic we’ve seen before, like with BP over the Gulf of Mexico spill. Wells Fargo’s statement emphasised the size of their workforce over the five-year period and downplayed the proportion involved in the fraud.

The CEO at the time, John Stumpf, claimed that the behaviour was against the company’s ethics and culture. However, employees reported a very different story — one of a toxic sales culture where wrongdoing was widespread. Even after the scandal broke and employees were fired, Wells Fargo continued to legally fight against whistleblowers, arguing that those dismissed failed to meet targets or exhibited inappropriate behaviour. This pattern was ignored by the bank, and they even resisted a class action lawsuit from former employees who claimed they were penalised for raising concerns.

TL: It’s reminiscent of the Post Office Horizon scandal, isn’t it? That phrase, “a fish rots from the head down,” seems particularly relevant here. This wasn’t a small issue; it was a cultural problem that drove people to behave in a certain way. New employees would see this behaviour and just assume it was the norm.

KH: Absolutely right. Many employees recalled being excited and proud to work for Wells Fargo, only to face pressure from day one with these aggressive targets. The toxic culture permeated the company from the top down.

TL: So let’s talk about the customers. How did the customers respond? Are we talking epic backlash on social and and elsewhere?

KH: There was an epic backlash, not just on social media, but in the real world, particularly in terms of customer behaviour. If you can’t trust your bank, you’re in serious trouble, aren’t you? Trust is absolutely crucial, and people stopped trusting Wells Fargo, which translated into their behaviour. They stopped opening accounts; new account openings dropped by 43%, and credit card applications fell by 55%.

Now, how much of this was based on the fraud or other factors, I’m not sure, but sales were down, essentially. There were also anecdotal reports that other banks experienced a sort of halo effect from this lack of trust, with people becoming wary of the whole industry, not just Wells Fargo. I think that’s really interesting.

TL: Definitely interesting. We’ve seen that before, especially when a crisis affects an entire industry. So, what was the outcome? Let’s look at the money first.

KH: That’s always an interesting place to start, isn’t it? The bank did repay customers, and in 2020 they agreed to a $3 billion settlement to address claims from customers, employees, and $500 million to investors. These fake accounts painted a picture of success that was misleading, so it was considered to have misled investors. Now, $3 billion sounds like a lot, but critics argued it was just a drop in the ocean considering the bank made $200 billion in profit over the previous 10 years.

There was also a very personal cost for the CEO, John Stumpf, who was in charge throughout the period. Initially, he refused to resign, saying, “I think the best thing I can do right now is lead this company forward,” but he did end up resigning in October, just a month after the scandal broke. He faced brutal questioning from the Senate Banking Committee, including from Senator Elizabeth Warren, who told him he should resign and face criminal charges.

So, he stepped down, and Tim Sloan took over. Sloan had been with Wells Fargo for 29 years, so he was seen as an insider, which wasn’t particularly well received. He immediately launched a campaign to restore trust in the bank, but it was too soon. The issue hadn’t been fully resolved, and even though employees were fired and the bank took an initial financial hit, the investigation was ongoing, with whistleblowers still coming forward and settlements with customers not yet reached.

Sloan lasted about three years, and then, in 2019, Charlie Scharf was appointed CEO from outside the company, which was probably a better idea. He was in place in 2020 when the final settlements were made and did a lot of work to convey that this was part of a past culture, stating clearly that the behaviour was reprehensible and inconsistent with Wells Fargo’s values. They also got rid of the aggressive sales target system, which is a positive step.

TL: The one with the “eight” in it that we really disliked?

KH: Yes, indeed. I suppose “Grow 20” wouldn’t have quite the same ring to it, would it?

TL: With all that said, this has been going on for a long time, and they have started changing the way they operate. But could it happen again?

KH: Yes, unfortunately, it could happen again, and it has already happened. We see a recurring theme throughout this podcast series. In 2022, Wells Fargo was ordered to pay $22 million to a senior executive in Chicago for violating whistleblower protection laws in a completely separate case. This executive had raised concerns about fraud and price fixing, and Wells Fargo argued that they were let go as part of a restructuring, but investigators found that didn’t match the pattern of the restructure.

TL: That’s not a good sign for whistleblowers, is it?

KH: No, it’s certainly not.

TL: Has the bank recovered, would you say?

KH: Not fully. It’s on the road to recovery, but the scandal still haunts its reputation. In 2018, the Federal Reserve restricted Wells Fargo from growing its assets until it addressed all the compliance failures. That’s a significant move, essentially saying the bank couldn’t expand until it fixed its issues. That restriction remains in place today, although it is likely to be lifted soon. In February 2024, and we’re recording this in July 2024, the US administration lifted a consent order on Wells Fargo. This order required the bank to prove it was implementing improvements to areas like product sales and whistleblower protection.

There are still a few lawsuits outstanding. For instance, at the end of 2023, a former executive named Carrie Tolstedt pleaded guilty to obstructing regulators investigating the bank in 2016. She received three years probation but avoided prison, although prosecutors sought a 12-month sentence. Tolstedt oversaw the cross-selling strategy and worked closely with the CEO, signing off on public disclosures about the bank’s performance.

She’s the only executive who faced criminal charges, and although she left Wells Fargo in 2016 with a $125 million retirement package, the bank managed to recover around $67 million of that. It’s a case of very mixed messages. John Stumpf, meanwhile, was banned from the banking industry entirely and fined $17.5 million for his role in the scandal.

TL: What are the key lessons from this crisis?

KH: We’re seeing some common themes here. I’d say there are two main takeaways: spotting the crisis early and fostering a culture that allows issues to be raised. The first point is about recognising patterns. Wells Fargo either didn’t see or chose not to see a very clear pattern, much like the Post Office Horizon scandal in the UK. Numerous people were raising the same concerns, but rather than looking at the overall picture, Wells Fargo handled each case individually and fought them. The company’s approach seemed to be to contest every claim, whether it was individual or collective, often dragging out disputes for years.

And let’s not forget, this is a massive corporation with deep pockets going up against individuals. That’s a tough battle.

TL: I was also going to say, as you mentioned earlier, Wells Fargo had multiple channels for raising concerns—an ethics hotline, HR, etc. But if people aren’t heard, those systems are useless.

KH: Absolutely. Whistleblowers are, in theory, protected in the US. But if you discredit them, as Wells Fargo did by firing them for poor performance (including against sales targets that were the root of the problem), then the protections fail. None of those systems worked to shield the whistleblowers. And then there’s the toxic culture that led to all of this in the first place.

TL: It’s a recurring theme in crisis management simulations too, isn’t it? Psychological safety is essential. If people don’t feel safe to raise issues, whether it’s during a crisis or just day-to-day, they won’t speak up. This suggests there wasn’t a psychologically safe environment at Wells Fargo.

KH: Precisely. That culture didn’t permit people to come forward with their concerns without fear of being fired or penalised. If you want to mitigate the damage a crisis can cause, you need a culture where people feel safe to speak up.

TL: I’d like to welcome Jane Fordham to help us explore these issues further. Jane is the Head of People and a partner at Hanbury Strategy, a corporate communications and public affairs agency. She’s an expert on corporate culture, a coach, leadership consultant, and trainer. Welcome, Jane.

Jane Fordham: Thank you, I’m snickering.

TL: I’m going to dive straight in. Kate and I see this crisis as primarily a failure of culture. How do you create a culture where people are encouraged to perform well but not under such extreme pressure that they crack? Is there a balance to be struck?

JF: You’re absolutely right. This was a cultural failure. If we simplify the concept of culture, it’s essentially values plus behaviour. Great culture doesn’t happen by accident; it’s intentional, designed, and measured. While there was clearly a failure of culture, it also seemed there was a lack of accountability. People should have been allowed to think differently and speak up, but they weren’t. If you set high standards, you must also allow people to be human and to raise concerns without fear.

TL: Yes, values are a crucial part of that. Are there specific red flags that indicate a culture of extreme pressure and stress?

JF: Definitely. I think about the three Cs: clarity, communication, and consistency. Organisations should have clear expectations and communicate these before an employee even starts, so everyone is on the same page. As for red flags, there are both obvious and subtle indicators. In a large corporation like Wells Fargo, there are plenty of data points — absence rates, causes of illness, staff turnover, exit interviews, and even platforms like Glassdoor, where employees can share their experiences. A combination of hard and soft data points can reveal a lot, and there are usually signs long before it becomes a widespread issue.

KH: That’s fascinating because there were many signals before it became clear that over 5,000 employees were defrauding customers. There must have been clues along the way. If someone raises a concern, what’s the best way to handle it?

JF: It’s a two-level approach. First, there’s the human response. As a manager, you need to listen actively and without judgement, creating a safe space for that person. Second, there should be a clear process to follow. Explain to the employee what the options are and collaborate with them on the next steps. Sometimes anonymity is preferred, and managers should find a way to address the concern without exposing the individual.

KH: I think Wells Fargo struggled because, while they picked up on issues at branch level, these were quickly shut down. But when the same thing is happening across multiple branches, someone needs to join the dots.

JF: Exactly. It’s surprising, given the scale and duration of this issue, that no one picked up on the pattern. Wells Fargo was very target-driven, so they had ample data tracking individual, team, and branch activities. That data could have been used to identify emerging patterns of concern early on.

TL: “In data we trust.” Jane, you mentioned psychological safety, which is also important in crisis simulations. How does a company address isolated issues while reinforcing culture and ethics across the whole organisation?

JF: Great question. It starts with clarity, communication, and consistency. Address the issues openly, acknowledge the mistakes, and communicate clearly about what changes will be made going forward. Trust is built gradually, so it’s about consistent actions that reflect the values of the organisation. Leadership needs to take responsibility and engage honestly. It’s not about rebuilding overnight but through continuous, open dialogue.

TL: The phrase “a fish rots from the head down” often comes to mind when discussing culture. What role does leadership play in setting and maintaining culture?

JF: Leadership has an enormous role. Leaders set the tone by clearly articulating what is expected and demonstrating those values through their own behaviour. But culture isn’t just created in mission statements; it’s lived daily by everyone. An organisation as large as Wells Fargo will have different subcultures, and that’s fine as long as the overarching corporate culture is consistent and recognisable.

Outro

You’ve been listening to “What Just Happened?” with Kate Hartley and Tamara Littleton. If you enjoyed the podcast, please subscribe, rate, and review.