Two weeks after being ordered to reinstate a branch manager fired for raising concerns about improper sales practices, Wells Fargo & Co. has acknowledged it could have a much larger whistleblower problem in the aftermath of a $185 million settlement with federal regulators and Los Angeles last year over allegations the bank opened up to 2.1 million unauthorized accounts.
Wells Fargo told federal regulators Friday in a quarterly report to the Securities and Exchange Commission that it is facing “multiple single plaintiff Sarbanes-Oxley Act complaints and state law whistleblower actions filed with the Department of Labor or in various state courts alleging adverse employment actions for raising sales practice misconduct issues.” The report also noted that expanded regulatory oversight of the bank’s sales practices “may lead to a significant increase in the identified number of potentially unauthorized accounts.”
For Wells Fargo, the pending whistleblower complaints pose both a financial and reputational risk as the bank seeks to rebound from a scandal that prompted its chief executive, John Stumpf, to step down.
“Wells Fargo may have substantial exposure in some of the whistleblower cases because many of the whistleblowers were unable to secure comparable employment in the financial services industry. Therefore, back pay liability and lost future earnings in some of these cases will likely exceed $1 million,” said Jason Zuckerman, a whistleblower lawyer at Washington’s Zuckerman Law.
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Last month, the U.S. Labor Department ordered Wells Fargo to pay $577,500 in back pay, damages and legal fees to a former branch manager in California who was fired in 2011 after raising concerns about three subordinates — described as “private bankers.” The department’s Occupational Safety and Health Administration found that the branch manager’s reports were a contributing factor in her firing and made her eligible for whistleblower protections under the Sarbanes-Oxley Act and the Consumer Financial Protection Act.
“No banking industry employee should fear retaliation for raising concerns about fraud and practices that violate consumer financial protections,” Barbara Goto, the Occupational Safety and Health Administration’s regional administrator in San Francisco, said in a statement then. “The U.S. Department of Labor will fully and fairly enforce the whistleblower protection laws under its jurisdiction.”