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Senators Challenge Wells Fargo Over Fired Employees

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Three senators are asking Wells Fargo about its response to unauthorized accounts and its disclosure of the details related to this fraudulent activity and have asked them to provide answers to them by Dec. 5.

On Thursday, Sens. Elizabeth Warren, Ron Wyden and Bob Menendez questioned the accuracy of the bank’s filings with the Financial Industry Regulatory Authority tied to the firing of employees over some 2 million possibly fake accounts.

In their six-page letter to President & CEO Tim Sloan which ends with 10 questions, the senators note that information recently obtained from FINRA shows that Wells Fargo filed nearly 18,000 U5 reports from 2011 to 2015 for fired staff.

“These reports … confirm that Wells Fargo had ample information about the scope of fraudulent sales practices occurring at the bank long before the [$185 million Consumer Financial Protection Bureau] settlement, and they raise additional questions about Wells Fargo’s response to this illegal activity,” the senators stated. “If this is the case, then it would appear that Wells Fargo concealed key information from regulators that may have revealed the bank’s misdeeds long before the September 2016 settlement.”

(Related: Wells Fargo Facing SEC Probe That Could Focus on Disclosures)  

The three politicians also argue that recent news reports suggest that the bank may have violated FINRA rules “by filing incomplete or inaccurate U5s for many fired employees, raising questions about whether the company took retaliatory action by reporting defamatory information on whistleblowers.”

FINRA has told the senators that close to 20% — about 3,355 out of roughly 17,750 U5 forms – were for employees listed as “discharged,” “permitted to resign” or “other” (which includes “failure to perform job duties”).

As the senators explain in their letter to Sloan: “According to these reports, Wells Fargo terminated employees … for failing to meet the bank’s aggressive sales quotas; others were terminated after reporting illegal activity to Wells Fargo management. In an unknown number of these cases, Wells Fargo may have filed Form U5s that did not accurately reflect the reasons why employees were fired … If Wells Fargo submitted false or incomplete information about the fired employees in its mandatory disclosures to FINRA, the bank may have violated FINRA rules and misled regulators about the scope of the fraud.”

According to the senators, the bank “has a history of compliance problems related to U5 reporting,” and FINRA fined it $1 million in 2011 for “failing to meet requirement or ament U5 forms in a timely fashion when a ‘significant event’ occurs.”

The bank did not return a request for comment as of press time. 

Also on Thursday, Wells Fargo said it is being investigated by the SEC regarding its disclosure of the $185 million CFPB settlement, if that amount should have been considered material for the company and if bank executives may have falsely touted the growth in sales numbers related to the fake accounts.

(Related: Wells Fargo Facing SEC Probe That Could Focus on Disclosures)