Wells Fargo Fires More Than 100 Workers for Abusing U.S. Aid
Wells Fargo CEO apologizes for comments about diversity
Wells Fargo to pay $3 billion in settling criminal and civil
investigations into its fraudulent sales practices
Wells Fargo's Main Regulator Aims to Punish Former Managers
Wells Fargo Cuts Pay Rate in 2019 for Lowest-Producing Advisers
Smoke at Data Center Leaves Wells Fargo Customer's Without Access to
Online Banking, Mobile Services
agreeing to hold its size to roughly $2.0 trillion
Workers Say Wells Fargo Unfairly Scarred Their Careers
Wells Fargo admits it incorrectly foreclosed on 545 homeowners it should have helped
Protesters urge Wells Fargo, Chase customers to close their accounts
Wells Fargo plans to cut up to 26,500 jobs over three years
Eleven bank employees in the South Bay have requested privacy
Wells Fargo mistake could have led to 400 foreclosures
Another Wells Fargo mess: Pet insurance ripoff
Wells Fargo employees altered business customers' information: WSJ
Wells Fargo will pay $480 million to settle securities fraud lawsuit
Warren Buffett defends Wells Fargo's 'cardinal sin'
Wells Fargo could face $1 billion penalty for auto and mortgage abuses
Wells Fargo to oppose nuns on review resolution: document
Wells Fargo accused of preying on black and Latino homebuyers in California
The Fed drops the hammer on Wells Fargo
Wells Fargo billing glitch infuriates customers
Wells Fargo fires foreign exchange bankers for overcharging clients
Wells Fargo Whistle-Blower Wins $5.4 Million and His Job Back
Wells Fargo fined $24 million over servicemember loans
Senators Investigate Reports Wells Fargo Punished Workers
FINRA Seeks Information from Former Registered Bank Employees of Wells Fargo
Wells Fargo to return $3.4 mln to brokerage clients over risky products
Wells Fargo's legal headaches are hurting its profits
Wells Fargo wrongly hit homebuyers with fees to lock in mortgage rate
Wells Fargo May Have Charged 500,000 Clients for Unwanted Insurance
Wells Fargo said to be accused of making improper mortgage changes
Opinion: It's strike three for Warren Buffett as Wells Fargo faces
investigation
By Jonathan Rochford
Published: Sept 23, 2016 1:12 p.m. ET
Two other incidents lead to questions about the billionaire
investor's wholesome reputation
By
Jonathan
*Rochford
Billionaire investor Warren Buffett is famous for his
"front-page-of-the-newspaper test."
In a recent interview with Bloomberg,
he described it, simply, as not doing anything he would be embarrassed
to have written up on the front page of the newspaper. To encourage
ethics over profits, he tells his managers:
"Lose
money for the firm, and I will be understanding; lose a shred of
reputation for the firm, and I will be ruthless."
However, three recent incidents have brought Buffett to the front page
of the newspaper, damaging his previously wholesome and folksy reputation.
*Strike one* is Berkshire Hathaway subsidiary Clayton Homes being
profiled for predatory lending
.
Buffett defended Clayton Homes
at the Berkshire Hathaway BRK.B, -1.04%
annual meeting and in the annual letter to shareholders
. Rather than
responding directly to the accusations or laying out changes that would
be made, he tried to highlight the positives of the business.
The fact that Buffett can't even say something bland like "Wells
Fargo has done the wrong thing and it must make changes" speaks
volumes.
*Strike two* for Buffett has been numerous articles on the aggressive,
but legal, tax maneuvers
undertaken
by Berkshire Hathaway. Buffett has publicly advocated for higher taxes
on high-income individuals. The "Buffett Rule
" was named after him when
he suggested in 2011 that individuals earning more than $1 million
should pay an effective tax rate of no less than 30%. That's a laudable
goal, but it wouldn't mean that much for Buffett, as the vast majority
of his wealth is tied up in Berkshire Hathaway shares.
Berkshire Hathaway is not unlike most companies in that it legally seeks
to minimize taxes. To be fair, it certainly isn't as bad as some
technology companies, like Apple AAPL, -1.67%
in
tax-avoidance strategies, which is due to the fact that its income is
predominantly earned in the U.S. But it does stand out for its $61.9
billion of deferred tax liabilities,
which
Buffett has described as akin to an interest-free loan from the U.S.
government. Berkshire Hathaway doesn't pay dividends, and Buffett has
noted a key reason is that shareholders would have to pay taxes on any
dividends. It has participated in a tax-inversion acquisition as well as
asset swaps,
which also helped avoid taxes. As Forbes noted
,
Buffett's preaching on taxes should be taken with a pinch of salt.
The *third strike* for Buffett is the Wells Fargo WFC, +0.04%
scandal. Over two million accounts and credit cards were established
without client consent. Once the accounts were opened, customers were
billed for various fees on the unauthorized accounts. Low-level staff
did this as they feared they would lose their jobs
if they failed to hit the unrealistic cross-selling targets set by
senior management. A total of 2% of Wells Fargo's workforce has been
fired for involvement in the practices that date back at least five years.
Worse than the fraudulent activities themselves is that the behavior was
systemic and widely known. The behavior was so widespread that
management ordered staff to undergo training, in which they were told
that it was wrong to open accounts without customer permission. Yet by
continuing to insist that unrealistic targets had to be met, they gave
employees a green light to continue the misconduct.
Senior management can't claim it didn't know. At least one employee
emailed the CEO directly highlighting the problems. Employees who called
the internal whistleblower hotline were systematically fired, with their
managers given coaching on how to invent reasons for their dismissal
.
Retaliating against whistleblowers is illegal in the U.S., so the
problems with regulators are only just beginning for Wells Fargo.
Berkshire Hathaway is the largest owner of Wells Fargo shares, with
9.45% of the stock. Buffett has previously praised Wells Fargo saying it
is an above-average bank in its conduct and culture. Buffett has been
repeatedly asked for comment on the scandal but has refused to say
anything until November
.
The fact that he can't even say something bland like "Wells Fargo has
done the wrong thing and it must make changes" speaks volumes.
*Conclusion*
Warren Buffett and Berkshire Hathaway are legendary for the returns they
have generated for investors. In the 51 years since Buffett assumed
control of the company, Berkshire Hathaway's stock has outperformed the
S&P 500 Index by 11.1% a year
, although the
outperformance has fallen away in the past decade. Similarly, Buffett's
previously stellar reputation for ethical conduct has fallen away in
recent years. This arguably started in 2011 when key lieutenant David
Sokol resigned
after front-running Berkshire Hathaway on the takeover of Lubrizol. In
this instance, Buffett apologized to shareholders and accepted blame for
his part in the problems.
In the past two years, Buffett has suffered three strikes to his
reputation. The predatory lending at Clayton Homes, aggressive tax
practices at Berkshire Hathaway and its subsidiaries, and the recent
revelations of misconduct at Wells Fargo are all black marks. In each
case, Buffett has either failed to denounce the wrongdoing or has
endorsed the dubious behavior. Buffett and Berkshire Hathaway now seem
to live by the motto "Do as I say, not as I do," instead of adhering to
the front-page-of-the-newspaper test.
/Jonathan Rochford is a portfolio manager at Narrow Road Capital
, which specializes in high-yield and
distressed credit. /
Post Comment
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Dave Coe 5ptsuserFeatured
//
8 minutes ago
I thought I'd ask a few questions to better understand this problem.
Yes, it is upsetting that Wells Fargo had such an extensive problem with
fraudulent account setup for many years, however, one must not overlook
that the External Auditors, Internal Auditors and Regulators for year's
hadn't identified this problem.
Although, the auditor's might argue that they only sample, which doesn't
allow them to catch all fraud, this problem was so extensive, that I ask
if the Audit Partner on the job shouldn't be fired along with the CEO of
the bank, and if the Auditor's should be removed from this client?
Let's then ask if the Chief Risk Officer, Chief Internal Auditor and
Chief Compliance Auditor shouldn't also lose their jobs and what about
their designations? Doesn't the CPA Board have anything to say about
the people holding these designations?
Then let's think about the regulators who are only now asking the tough
questions. Sarbanes Oxley was implemented in 2002, what happened to the
SOX regulators?
It seems too easy to blame the CEO of the Bank but if we're really going
to see some change, shouldn't we also fire the Regulators that for years
didn't catch this problem?
Now we as tax payers also elect these senators to actually do something
about these types of problems. We've had rule changes after rule
changes after rule changes. But shouldn't some of these Senators who've
done absolutely nothing also go to jail?
Just thought I'd ask anyone some questions about who really is to blame
for this and other fiascos of this nature after having spent so much tax
payer money to pay for government rule changes that didn't catch yet
another fraud for years.
louis tan 5ptsuserFeatured
//
45 minutes ago
Like a cult following it has always been a myth.
Bill Lemsky 5ptsuserFeatured
//
54 minutes ago
Warren Buffett is a downright pirate. A legal pirate, but a pirate
nonetheless.
He'll do an occasional interview with Becky Quick and act all grandfatherly.
He is smart enough to leave his sabre, bandana, eyepatch and parrot in
the closet when he's in public. But make not mistake, Warren is a pirate!
Bill Lemsky 5ptsuserFeatured
//
52 minutes ago
By the way, ask him where he stands on leveling dividends and capital
gains as ordinary income. Let's eliminate the carry trade.
If you did so, his head would explode and that would be the end of Warren.
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Wells Fargo CEO John Stumpf resigns effective immediately
Published October 12, 2016 Associated Press
Wells Fargo CEO faces angry lawmakers on Capitol Hill
SAN FRANCISCO --- Wells Fargo's embattled CEO John Stumpf has resigned,
effective immediately, as the nation's second-largest bank is roiled by
a scandal over its sales practices.
The San Francisco bank said Wednesday that Stumpf will also relinquish
his title as chairman. Its chief operating officer, Tim Sloan, will
succeed Stumpf as CEO.
Stumpf had led Wells Fargo since 2007.
He faced congressional hearings and consumer wrath after Wells Fargo was
found to have opened millions of bank accounts without customers'
permission.
Stephen Sanger, the bank's lead director, will serve as the board's
non-executive chairman. Independent director Elizabeth Duke will serve
as vice chair.
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Wells Fargo agrees to $50 million settlement over homeowner fees