Welcome to the Great Women in Compliance Podcast, co-hosted by Lisa Fine and Mary Shirley.

In today’s episode of Great Women in Compliance, Lisa speaks with Ellen Hunt, who is the Senior Vice President and Audit, Ethics and Compliance Officer for AARP.  Ellen has accomplished so much for the compliance community, in the field and is a friend, advocate and mentor to a lot of people, Lisa and Mary included.

Following along from the episode a few weeks ago about a dream compliance team, this discussion is about what makes a great Chief Ethics and Compliance Officer (although the title may differ from place to place).

The discussion includes a discussion of what the roles and responsibilities are and should be for a new CECO.  This includes some thought about how to manage expectations of a Board and executive team, including the idea of looking at a program and seeing what may not be needed before adding new initiatives.

Ellen also talks about the best ways to lead a team, balancing the needs of high performers with other team members as a new CECO.  She provides a few practical strategies that anyone can use at any time with their teams or within the organization.

Join the Great Women in Compliance community on LinkedIn here.

In this special 5-part podcast series on the FCPA Compliance Report, I am considering the Airbus international anti-corruption enforcement action from a variety of perspectives from some of the top world’s top compliance practitioners and commentators on compliance. They include, Jay Rosen-Mr. Monitor; Mike Volkov-Editor of Corruption Crime and Compliance; Jonathan Armstrong-partner at Cordery Compliance in London; Cecilia Fellouse-Guenkel-Secretary General, The Circle of Compliance and Tom Fox-the Compliance Evangelist. In today’s Episode 2, Jonathan Armstrong considers the UK’s Serious Fraud Office role in the enforcement involving Airbus.

Highlights include:

  • The transparency in the UK-Deferred Prosecution Agreement process allows greater information to for the compliance professional.
  • What are the key differences in the UK and US DPA process?
  • The breadth and scope of the UK investigation.
  • The UK-DPA is not the end of the story as there may well be significant individual enforcement actions going forward.
  • What does Airbus mean for the new SFO style of anti-bribery enforcement action?

Resources

Cordery Compliance Client Alert on the Airbus enforcement action here.

Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode we take a deep dive into the Barr Sentencing Memo arguing to reduce the length of sentence requested for Roger Stone and his pardons of 13 convicted white-collar criminals.

Some of the highlights include:

  • What is the background to the Barr Sentencing Memo?
  • Can white collar defense lawyers use the DOJ reasoning to decouple of the sentencing guidelines?
  • What does all this mean for corporate culture?
  • When will Trump start attacking companies for doing business ethically?
  • What are the implications for the compliance discipline and CCO?
  • What tensions does all this create for the corporate compliance and corporate legal functions?
  • What happens when arbitrary behavior emanates from the top of an organization?

Resources

Matt Kelly blog post, Lessons from Justice Department Meltdown

This week I am exploring the Wells Fargo Department of Justice (DOJ) and Securities and Exchange Commission (SEC) settlement of $3 billion. The case presents multiple lessons for the compliance professional and one very large lesson for the consuming public. Today, I want to consider the fraud schemes used and approved by Wells Fargo to create the fraudulent accounts. The system was so widespread at the bank that it had its own name – Gaming. The details in this blog post were laid out in the Statement of Facts referenced in the DOJ Press Release announcing the settlement.

While Wells Fargo management was telling its customers, the banking public, investors and regulators that its cross-selling program was a needs-based program, it was in reality something very different. It was fraudulent scheme that Wells Fargo foisted on its employees to sell via direct pressure of continued employment that “caused to sell large volumes of products to existing customers, often with little regard to actual customer need or expected use”. Community Bank head Carrie Tolstedt was noted to have “directly” approved pressurized employees to engage in fraudulent and even illegal conduct to meet her sales goals. Cross-selling the banks products were a “significant criterion by which the performance of employees, ranging from tellers and bankers to RBEs, was evaluated.” The cross-selling program led Wells Fargo employees to engage in both illegal and fraudulent conduct to meet their sales goals.

To meet these employment objectives and criteria, Wells Fargo employees developed a wide variety of tactics under the rubric “Gaming” which was known within the bank as “employees’ manipulation and/or misrepresentation of sales to meet sales goals, receive incentive compensation and/or avoid negative consequences, such as reprimands or termination.”  Gaming was accomplished in two general manners. First Wells Fargo employees would engage in illegal “conduct to attain sales through fraud, identity theft, and the falsification of bank records”. The second type of conduct was both fraudulent and unethical such as to “sell products of no or low value to the customer, while believing that the customer did not actually need the account and was not going to use the account.”

What were the Gaming schemes? One was to simply create false records by forging customers signatures in order to open accounts which were never authorized or where the customer was never even contacted. From there, Wells Fargo employees would use customers personal information to create PIN numbers to activate the unauthorized debit cards. This scheme also involved employees creating fake applications for debit cards and other banking services from personal information.

Bank employees would take great pains to hide these fraudulent accounts from the customers in whose names they had been illegally created. They would alter customer information such as phone numbers, email addresses and physical addresses to prevent customers from actually receiving the debit cards or activation of the fraudulent services.

Yet another Gaming scheme was a practice known as “simulated funding”. Under this fraud scheme, bank employees would fashion false records by opening unauthorized checking and savings accounts to meet the cross-selling goals. They would then fraudulently and without authority transfer funds to the unauthorized account to meet the funding criteria required to receive credit for “selling” the new account. In this clearly illegal conduct, Wells Fargo employees would then transfer funds from existing accounts of the customers without their consent. It was found that literally millions of Wells Fargo’s customer accounts reflected transfers of funds between two accounts that were equal in amount to the product-specific minimum amount for opening a new account, which, thereafter, had no further activity. It was so pervasive that Wells Fargo employees would use personal funds or other methods to simulate actual funding of accounts that they had opened without customer consent.

Wells Fargo also approved, countenanced and otherwise allowed customers who by no means needed eight banking products or services to have them foisted upon such customers. The bank’s employees “intentionally persuaded customers to open accounts and financial products that the customers authorized but which the employees knew the customers did not actually want, need, or intend to use.” There were multiple fraud schemes used by Wells Fargo employees to  convince customers to open these unnecessary accounts. Some of them included “opening accounts for friends and family members who did not want them and by encouraging customers to open unnecessary, duplicate checking or savings accounts or credit or debit cards. Millions of secondary accounts and products were opened from 2002 to 2016, and many of these were never used by customers.”

All of these examples show just how invidious Wells Fargo management was to countenance and promote such tactics. Wells Fargo management, literally right up to the top of the organization, did so by making it clear to employees that their jobs were on the line if they did not meet their cross-selling sales quotas. In the Office of Comptroller of the Currency (OCC), Order of Charges, it stated, “Community Bank [headed by Carrie Tolstedt] intimidated and badgered employees to meet unattainable sales goals year after year”. Further, Wells Fargo senior management, to whom Tolstedt and the Community Bank ELT reported tolerated these illegal and fraudulent sales practices “as an acceptable side effect of the Community Bank’s profitable sales model.” Wells Fargo senior management declined to implement effective internal controls and actively overrode what few controls existed and “turned a blind eye to illegal and improper conduct” in the Gaming Program.

How did Wells Fargo become a business that tolerated as a side effect illegal and unethical conduct to hit a self-created metric? Was it perverse incentives? Did the Community Bank leadership in the form of Carrie Tolstedt and her ELT have a single focus on making the cross-selling metric to the exclusion of all else? Were they simply evil people who wanted to cheat everyone and everything; including (but not limited to) customers, investors, regulators, the Board of Directors, employees, the banking public and everyone else? Tomorrow I will conclude with some final reflections and an exploration of some of these questions and perhaps others.

But I will leave you with one question that I will consider tomorrow, Why would anyone ever do business with Wells Fargo again

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2020

 

 

This week’s guest on the Innovation In Compliance show is Sean Freidlin, Director of Product Marketing at SAI Global. He and Tom Fox chat about the article he recently posted on LinkedIn, Rise and Shine: The Morning Show’s Wakeup Call to Corporate America.

Overlapping Themes

Sean says that the central themes in movies often overlap with the common themes in ethics and compliance programs. In particular, he noticed that Apple’s flagship program, The Morning Show, tackles almost every issue that compliance teams build training about or write about in their code of conduct. Issues such as sexual harassment, diversity and inclusion, whistleblowing and retaliation are issues that many companies deal with. Sean comments that he applauds the risk Apple took to make the show, which shows their commitment to speak up about abuse of power when they see it.

Compliance and Ethics Issues

Tom asks Sean what is the general story arc of The Morning Show. Sean summarizes the plot, which includes a sexual harassment scandal, and comments that the show explores the butterfly effect on the culture and the people working there, as well as the corporate politics that are involved in managing a scandal. Sexual harassment is one of the top two issues that ethics and compliance professionals have focused on in the last year, according to Sean. He highlights several lessons ethics and compliance professionals can garner from the show, including:

  • Some people don’t know what isn’t allowed;
  • There should be a deeper commitment to communicating company values and policies;
  • The show highlights the role personal connections and relationships play in perpetuating a culture where people don’t do the right thing.

A Dilemma

You might find it harder to do the right thing if you like your boss or your colleague, but you know they’re doing something wrong. Your relationship with that person may cloud your judgment, Sean says. A positive and ethical leader has a positive influence on employees’ behavior; but a manager or leader who disregards the rules, policies and values of the company, will negatively affect everyone else. The bottom line, Sean points out, is that relationships are an essential part of a compliant organization or a culture where people do the right thing.

Tom quotes a line from Sean’s article, “Successful and powerful men can manage to survive and even thrive on their charm and influence, despite the unethical and immoral choices they make.” He and Sean discuss the moral and ethical dilemma of doing the wrong thing if it will help you be more successful.

The Reality of Whistleblowing

Sean says that The Morning Show does an excellent job of exploring what happens after you blow the whistle. A common mantra today is ‘If you see something, you should say something,’ However, saying something is just the beginning, Sean says. The one who blows the whistle faces more than just retaliation: the emotional impact is even weightier. That person has to live with the stress of knowing that the misconduct they reported is ultimately going to be the catalyst for so much drama, such as people losing their jobs, and the company losing money.

Resources

Rise and Shine: The Morning Show’s Wakeup Call to Corporate America

Sean Freidlin on LinkedIn

SAIGlobal.com

sean.freidlin@saiglobal.com