WELLS FARGO, YOUR BANK, AND THE LAW
Corporate Fraud Investigated by the FBI: The FBI continues to address corporate fraud cases—specifically involving subprime lending institutions, brokerage houses, home-building firms, hedge funds, and financial institutions—as a result of the financial crisis partly caused by the collapse of the subprime mortgage market in the fall of 2007. As a result of the current financial crisis, trillions of dollars in shareholder value were lost, several prominent companies went out of business, several prominent banks failed, and the federal government provided over a trillion dollars in relief to keep other companies from failing. A subprime mortgage lender is a business that lends to borrowers who do not qualify for loans from mainstream lenders.
|Fraud in the Markets: Why It Happens and How to Fight It
From the Inside Flap
It is no coincidence that the financial services industry was the breeding ground for the deadly forces that brought on the financial crash and its aftershocks. It is also no surprise that fraud played a starring role in the emergence of these dark chapters in American financial history.
Offering a complete perspective on the complicated and sobering impact of fraud in pushing the world’s preeminent financial system to disaster on many occasions, Fraud in the Markets: Why It Happens and How to Fight It reveals:
° The genesis of the culture of “anything goes” on Wall Street that fueled the innovation of super-risky asset-backed securities and the financial devastation suffered by institutions that invested in them.
Written by a nationally recognized expert in the field of fraud detection and prevention..
Once the subprime loans have been issued, they are bundled and sold as securities—a process known as securitization. Corporate fraud remains one of the highest priorities in CID. At the end of FY 2011, 726 corporate fraud cases were being pursued by FBI field offices throughout the United States, several of which involved losses to public investors that individually exceed $1 billion.
1913: Mexican revolutionary Pancho Villa stole 122 bars of silver from a Wells Fargo train in 1913, then secretly struck a deal to sell most of the loot back to the bank, according to newly found documents. University of California library curator Walter Brem said that after the robbery, Villa found it impossible to sell the silver, so he arranged to sell it to Wells Fargo for $50,000 in cash. At the time the silver was worth about $160,000. Villa agreed not to steal any more Wells Fargo property, and the bank decided to keep the buyback secret, Brem said. He said he suspects the bank didn’t go public so that it wouldn’t be seen as aiding a revolutionary and so that others wouldn’t copy Villa.
2005: An American Epidemic – Mortgage Fraud
Michael S. Richardson
Epidemic may sound like a strong word, but after considering the latest figures on real estate fraud, you may feel the word isn’t quite strong enough.
February 4, 2009: Wells Fargo announced it was canceling a business meeting and employee recognition event in Las Vegas due to negative allegations from media, members of Congress/public officials that the trip was a “pricey Las Vegas casino junket” and that the company was misusing taxpayers’ money, since Wells Fargo had been one of the banks that received “bailout” funds from the government a few months earlier.
July 31, 2009: Illinois Attorney General Lisa Madigan filed suit against Wells Fargo on July 31, 2009, alleging that the bank steers African Americans and Latinos into high-cost sub-prime loans. A Wells Fargo spokesman responded that “The policies, systems, and controls we have in place – including in Illinois – ensure race is not a factor. (Editor’s Note: Given how much damage Wells Fargo has done to homeowners across the Board of all races, it seems they are correct – they are out to shaft everyone. Their bottom line is money; it has nothing to do with anything else.)
March 2010: COCAINE TO MEXICO COMPLIMENTS OF WELLS FARGO. In an agreement with federal prosecutors, Wells Fargo acknowledged that between 2004 and 2007 Wachovia had failed to monitor and report money laundering by narcotics traffickers, including the cash used to buy four planes that shipped a total of 22 tons of cocaine into Mexico.
August 2010: Wells Fargo was fined by U.S. District Judge William Alsup for overdraft practices designed to “gouge” consumers and “profiteer” at their expense, and for misleading consumers about transactions and overdraft fees.
December 2011: TAX ADVOIDANCE AND LOBBYING. The non-partisan organization Public Campaign criticized Wells Fargo for spending $11 million on lobbying, not paying any taxes during 2008–10, getting $681 million in tax rebates, despite making a profit of $49 billion, laying off 6,385 workers since 2008, and increasing executive pay by 180% to $49.8 million in 2010 for its top five executives.
April 5, 2012: RELIES ON THE IGNORANCE OF BORROWERS/HIDES ERRORS: A federal judge ordered Wells Fargo to pay $3.1 million in punitive damages over a single loan, one of the largest fines for a bank ever for mortgaging service misconduct. Federal Bankruptcy Judge Elizabeth Magner cited the bank’s behavior as “highly reprehensible,” stating that Wells Fargo has taken advantage of borrowers who rely on the bank’s accurate calculations. She went on to add, “perhaps more disturbing is Wells Fargo’s refusal to voluntarily correct its errors. It prefers to rely on the ignorance of borrowers or their inability to fund a challenge, rather than relinquish gains obtained through improper accounting.”
RACIAL DISCRIMINATION ACT. The fine has come at a time that the Department of Housing and Urban Development (HUD) has launched an investigation of Wells Fargo into racial discrimination practices, the second federal probe in 2012 of alleged violations of misconduct with regard to race. The other, began in 2011 by the National Fair Housing Alliance has found “overwhelming” evidence that six of the nation’s major banks handle foreclosures in neighborhoods populated primarily by minorities differently than in white communities.
Wells Fargo entered a settlement agreement with the U.S. Department of Justice for allegedly discriminating against African-American and Hispanic borrowers from 2004 to 2009. Wells Fargo will pay $125 million to subprime borrowers and $50 million in direct down payment assistance in certain areas, for a total of $175 million. Wells Fargo spokespersons denied all claims and are settling only to avoid contested litigation.
August 14, 2012: Wells Fargo agreed to pay around $6.5 million to settle SEC charges that in 2007 it sold risky mortgage-backed securities without fully realizing their dangers.
October 9, 2012: THIRD ALLEGATION LEVIED AGAINST WELLS FARGO IN 2012. The United States Federal Government sued the bank under the Federal False Claims Act. The suit alleges that Wells Fargo defrauded the FHA over the past ten years, underwriting over 100,000 FHA backed loans when over half did not qualify for the program.
October 2012: Wells Fargo sued by U.S. federal attorney Preet Bharara over questionable mortgage deals.
March 8, 2013: Litigation against Freddie Mac and HSBC: The Federal Housing Finance Agency (FHFA), acting as conservator for the Federal Home Loan Mortgage Corporation (Freddie Mac) commenced litigation in the Supreme Court of the State of New York against Decision One Mortgage Company, LLC (Decision One), and HSBC Finance Corporation (HSBC) (as an alleged successor in interest). FHFA’s Summons with Notice alleges claims for breach of contract, damages, specific performance, indemnity, and reimbursement arising out of the banks’ alleged failure to repurchase loans. FHFA alleges that Decision One breached contractual warranties as to the quality of the mortgage loans, including that the loans complied with relevant statutes, complied with underwriting guidelines, and were not predatory. FHFA seeks specific performance of alleged repurchase obligations or equitable damages totaling nearly $165,000,000.
April 2013: Vile Acts of Evil, Michael A. Kirchubel: Quotes from newspapers, historians, economists, bankers, and revered and reviled political figures drive the story line and alternate with Kirchubel’s commentary providing a look at unseen causes of our nation’s major calamities: recessions, depressions, panics, wars, taxes, foreclosures, and bailouts. This analysis of our American economic and political history, from colonial times to today, includes recommendations for fixing our current mess. Your ultimate understanding of how the pieces all fit together is well worth the price of your anger.
May 2013: U. S. Senator Elizabeth Warren (D-Mass.) called out Wall Street regulators for their habit of giving tepid punishments to misbehaving banks, and asked the agencies to justify their policy of settling with the wrongdoers out of court. Warren’s letter follows a similar request she made to another banking regulator, the Office of the Comptroller of the Currency, at a February Senate Banking Committee hearing. When agency officials couldn’t answer Warren’s question about the last time they took a financial institution to trial—some said it was unnecessary—she asked them to pony up any research it had on the trade-offs of settling versus going to trial. Last week, the OCC responded that it had no such research.
“If you’re caught with an ounce of cocaine, you’re going to go to jail,” Warren said. “But if you launder nearly $1 billion for international cartels . . . you go home.”
May 2013: (MoneyWatch) New York State’s attorney general is suing Bank of America (BAC) and Wells Fargo (WFC) for violating the terms of a $26 billion mortgage settlement.
The banks have not complied with standards established for processing homeowners’ loan modification applications, New York Attorney General Eric Schneiderman said in a statement released today. He said he plans to sue the banks unless a monitoring committee set up to enforce the settlement’s terms takes action.
“Wells Fargo and Bank of America have flagrantly violated those obligations, putting hundreds of homeowners across New York at greater risk of foreclosure,” Schneiderman said.
Wells Fargo has also ignored obligations in California and, presumably, all other states. As noted in the following paragraph, banks use “missing documents” as an excuse to avoid modification and proceed with bankruptcy. All paperwork submitted is via FAX (with confirmation of receipt) and FedEx or UPS (with confirmation of receipt). Yet, every conversation with the bank results in “missing paperwork.”
Schneiderman claims BofA and Wells Fargo failed to acknowledge receipt of loan modification applications within three business days; did not tell homeowners about missing documents in their applications; didn’t give borrowers enough time to correct deficiencies; and failed to take action on loan modification requests within 30 days. He said these delays would result in additional fees and interest and in homeowners’ losing their homes.
Schneiderman said his office had documented 339 of these violations in the past seven months.
Last year five of the nation’s largest banks — including JPMorgan Chase (JPM), Citigroup (C) and Ally Financial — agreed to a sweeping pact with the attorneys general of 49 states over charges the banks evicted people using false or incomplete documentation. The settlement included 304 rules laying out how to respond in a timely fashion to homeowners seeking to modify their mortgages.